Question 1

Incorrect acceptance is directly related to which of the following?
A)The efficiency of the audit.
B)The ineffectiveness of the audit.
C)The cost of the audit.
D)All of the above.

Accepted Answer

Incorrect acceptance occurs when the auditor fails to identify a material misstatement in the financial statements, resulting in an ineffective audit. This can lead to incorrect audit opinions, which can have serious consequences for investors and stakeholders. The efficiency and cost of the audit may also be affected, but they are not directly related to incorrect acceptance.

Question 2

Which of the following is not considered when obtaining audit evidence through sampling?
A)The effectiveness of control procedures.
B)The efficiency of control procedures.
C)The dollar accuracy of account balances.
D)The dollar accuracy of classes of transactions.

Accepted Answer

The efficiency of control procedures is not typically considered when obtaining audit evidence through sampling. Audit sampling primarily focuses on the effectiveness of controls, accuracy of account balances, and transaction classes, rather than on how efficiently those controls operate.

Question 3

Which of the following is not considered to be nonsampling risk?
A)Misinterpretation of information.
B)Use of improper audit procedure.
C)The sample does not represent the population.
D)Carelessness of the auditor.

Accepted Answer

Nonsampling risk refers to the risk that the auditor reaches an incorrect conclusion for any reason not related to the sampling risk, such as misinterpretation of information, use of improper audit procedures, or carelessness. Sampling risk, on the other hand, arises from the possibility that the sample selected is not representative of the population. Therefore, option C, "The sample does not represent the population," is considered a sampling risk, not a nonsampling risk.

Question 4

The audit objective of attributes sampling is to test the correctness of an account balance.

Accepted Answer

The audit objective of attributes sampling is to test the rate of occurrence of certain qualities or characteristics in a population, such as the rate of error in a particular transaction type or the rate of compliance with a specific control. It is not specifically designed to test the correctness of an account balance.

Question 5

In attributes sampling if the selected item cannot be located,the auditor should assume that the control procedure was not followed and assess that item as a failure.

Accepted Answer

If the item cannot be located, the auditor cannot determine if it complies with the control procedure or not. Therefore, it should be assessed as a failure to ensure that a conservative estimation of the control's effectiveness is obtained.

Question 6

When performing sampling,the auditor is most concerned with which of the following?
A)Risk of incorrect rejection.
B)Risk of incorrect acceptance.
C)Risk of excess sample size.
D)Risk of errors in the population.

Accepted Answer

The risk of incorrect acceptance is the most concerning because it could result in the auditor concluding the financial statements are materially correct when they are not, leading to unreliable audit opinions. Additionally, with incorrect acceptance, the auditor may fail to detect misstatements in the financial statements, leading to a failure to identify financial reporting errors or fraud. The risk of incorrect rejection relates to the auditor rejecting a sample that is actually representative of the population, while the risk of excess sample size refers to the auditor taking a sample size that is larger than necessary. The risk of errors in the population is a general concern but is not specific to sampling.

Question 7

Which of the following describes sampling risk?
A)The sample will not contain characteristics representative of the population such that inferences made about that population will be incorrect.
B)The population will not contain characteristics representative of the sample such that inferences made about that sample will be incorrect.
C)The auditor incorrectly applies sampling methodology.
D)The sample size will be larger than needed.

Accepted Answer

Sampling risk is the risk that the sample selected for audit may not be representative of the population and may lead to incorrect conclusions. Option A correctly describes this type of risk. Option B describes selection bias, while option C describes execution risk, and option D describes non-sampling risk.

Question 8

Concluding that the book value of inventory is correct when it is materially misstated is an example of which of the following risks?
A)Incorrect rejection.
B)Incorrect acceptance.
C)Insufficient sample size.
D)None of the above.

Accepted Answer

This is an example of incorrect acceptance, which occurs when the auditor concludes that a material misstatement does not exist when it actually does. In this case, the auditor is accepting a misstated inventory book value as correct.

Question 9

In MUS sampling basic precision is the upper misstatement limit when no misstatements are detected in a MUS sample.It is computed by multiplying the sampling interval by the error expansion factor.

Accepted Answer

The answer of In MUS sampling basic precision is the...

Question 10

By using data analytics tools,the auditor can potentially audit the whole population rather than taking a sample.

Accepted Answer

Data analytics tools allow the auditor to analyze a large volume of data and entire population rather than taking a sample, which reduces the risk of misstatement and improves the accuracy of the audit.

Question 11

For which of the following audit procedures would sampling be most appropriate?
A)Inquiry.
B)Observation.
C)Confirmation.
D)Analytics.

Accepted Answer

Sampling would be most appropriate for confirmation procedures, which involve obtaining information from a third party (such as a bank or customer). Sampling allows the auditor to obtain a representative sample of transactions or balances to confirm, rather than confirming all balances or transactions. Sampling can help reduce the time and cost involved in performing confirmations while still providing sufficient evidence. Inquiry, observation, and analytics are other types of audit procedures where sampling may be used, but confirmation is the best choice in this scenario.

Question 12

In analysis of the results of an attributes sampling plan,an auditor may determine that the sample size must be increased.

Accepted Answer

If the results of an attributes sampling plan reveal a higher-than-expected error rate or a low confidence level, the auditor may decide to increase the sample size to achieve a more reliable estimate of the population's characteristic. Therefore, this statement is true.

Question 13

Using attributes sampling the auditor can test for multiple attributes using the same source documents.

Accepted Answer

Attributes sampling allows the auditor to test multiple attributes using the same source documents. This saves time and resources because the auditor can test for several attributes with fewer sample sizes.

Question 14

Simple random sampling,systematic sampling,and block sampling are acceptable sample selection methods for statistical sampling.

Accepted Answer

The answer of Simple random sampling,systematic sampling,and block sampling are...

Question 15

Stratification of the population into several homogeneous subpopulations generally creates audit efficiency.

Accepted Answer

Stratification allows auditors to focus their testing on specific areas or transactions that are more likely to contain errors, reducing the sample size needed and increasing efficiency. It also allows for more targeted and effective testing procedures, leading to a more accurate and complete audit.

Question 16

Random number,haphazard selection,and block sampling are acceptable sample selection methods for nonstatistical sampling.

Accepted Answer

Nonstatistical sampling methods are based on judgment and experience instead of statistical techniques. Random number, haphazard selection, and block sampling are among the acceptable sample selection methods for nonstatistical sampling.

Question 17

Which of the following occurs when,based on sample results,control risk is assessed excessively high?
A)Audit inefficiency.
B)A less expensive audit.
C)Reduction of substantive testing.
D)Errors that are more likely to occur than anticipated.

Accepted Answer

When control risk is assessed excessively high, the auditor believes there is a greater risk that the internal controls do not prevent or detect material misstatements. As a result, the auditor may perform more extensive testing than necessary, leading to audit inefficiency. This means more time and resources are used than would be if the control risk were assessed accurately.

Question 18

Which one of the following is not a decision the auditor makes when using attributes sampling?
A)Sample size.
B)Selection of items included in the sample.
C)Evaluation of sample information.
D)Whether to document all phases of the sampling process.

Accepted Answer

Documenting all phases of the sampling process is not a decision related to the actual sampling technique itself, but rather a matter of audit documentation and procedure. The auditor must still make decisions related to sample size, selection of items, and evaluation of sample information in order to perform effective attributes sampling.

Question 19

Which one of the following is a decision the auditor makes when using attributes sampling?
A)The sampling unit.
B)Period covered by testing.
C)Completeness of the population.
D)All of the above are auditor decisions.

Accepted Answer

All the options listed are decisions an auditor makes when using attributes sampling. The sampling unit defines what constitutes a single sample (e.g., a transaction or a document), the period covered by testing specifies the timeframe for which the samples are relevant, and ensuring the completeness of the population is crucial for the sampling to be representative of the entire dataset under audit.

Question 20

In attributes sampling,if the upper limit of the possible deviation rate exceeds the tolerable rate,the auditor can rely upon the control as being effective.

Accepted Answer

If the upper limit of the possible deviation rate exceeds the tolerable rate, it indicates that the control may not be effective, and the auditor cannot rely on it as being effective.

Quiz 8: Specialized Audit Tools: Sampling and Generalized Audit Software

Incorrect acceptance is directly related to which of the following?

Which of the following is not considered when obtaining audit evidence through sampling?

Which of the following is not considered to be nonsampling risk?

The audit objective of attributes sampling is to test the correctness of an account balance.

In attributes sampling if the selected item cannot be located,the auditor should assume that the control procedure was not followed and assess that item as a failure.

When performing sampling,the auditor is most concerned with which of the following?

Which of the following describes sampling risk?

Concluding that the book value of inventory is correct when it is materially misstated is an example of which of the following risks?

In MUS sampling basic precision is the upper misstatement limit when no misstatements are detected in a MUS sample.It is computed by multiplying the sampling interval by the error expansion factor.

By using data analytics tools,the auditor can potentially audit the whole population rather than taking a sample.

For which of the following audit procedures would sampling be most appropriate?

In analysis of the results of an attributes sampling plan,an auditor may determine that the sample size must be increased.

Using attributes sampling the auditor can test for multiple attributes using the same source documents.

Simple random sampling,systematic sampling,and block sampling are acceptable sample selection methods for statistical sampling.

Stratification of the population into several homogeneous subpopulations generally creates audit efficiency.

Random number,haphazard selection,and block sampling are acceptable sample selection methods for nonstatistical sampling.

Which of the following occurs when,based on sample results,control risk is assessed excessively high?

Which one of the following is not a decision the auditor makes when using attributes sampling?

Which one of the following is a decision the auditor makes when using attributes sampling?

In attributes sampling,if the upper limit of the possible deviation rate exceeds the tolerable rate,the auditor can rely upon the control as being effective.