Question 1

MUS sampling has all of the following advantages over other statistical methods except which?

Accepted Answer

The sample size in Monetary Unit Sampling (MUS) is influenced by the variability of the population, not the standard failure.

Question 2

Planning and documentation of sampling use
What are the steps to implement an attribute estimation sampling plan?

Accepted Answer

The answer of Planning and documentation of sampling use
What are...

Question 3

Sampling factors
List the four important decisions an auditor must make when deciding to use sampling.

Accepted Answer

The answer of Sampling factors
List the four important decisions an...

Question 4

Which of the following task is not performed by Generalized audit software?

Accepted Answer

Generalized audit software can perform all the tasks listed: footing a file, evaluating statistical sample results, checking for gaps in processing sequences, and preparing custom reports.

Question 5

The upper misstatement limit is computed by adding

Accepted Answer

The upper misstatement limit is computed by adding basic precision, most likely misstatement and incremental allowance for sampling error. Therefore, all of the choices (A), (B), and (C) are correct.

Question 6

A major disadvantage of MUS sampling is which of the following?

Accepted Answer

MUS sampling is primarily used to test for overstatements, which may result in a disadvantage in identifying potential understatement errors in the account balance.

Question 7

Nonsampling risk
What is nonsampling risk and how can it be eliminated?

Accepted Answer

The answer of Nonsampling risk
What is nonsampling risk and how...

Question 8

In sample selection,block sampling deals with

Accepted Answer

Block sampling involves selecting all items within a specific time period, such as a day or week, rather than randomly selecting individual items.

Question 9

Dividing the population into relatively homogeneous groups in order to reduce sample size is called

Accepted Answer

Stratification involves dividing the population into relatively homogeneous groups, or strata, based on certain characteristics, such as age or income level. Each stratum is then sampled separately, which reduces the required sample size and increases the precision of estimates. Ratio estimation and difference estimation are techniques used for calculating population parameters, and MUS sampling is a type of probability sampling method.

Question 10

In sample selection,systematic selection deals with

Accepted Answer

Systematic selection involves selecting every nth item after a random start. This method is used to obtain a representative sample while maintaining efficiency and reducing bias. It ensures that every item in the population has an equal chance of being selected, as long as the selection interval (n) is chosen appropriately.

Question 11

In sample selection,haphazard selection deals with

Accepted Answer

Haphazard selection refers to a non-random selection process where items are chosen using convenience or arbitrary methods. It aims to avoid conscious bias, but it does not ensure that each item in the population has an equal chance of selection (Option A). It also does not follow a systematic process like selecting every nth item after a random start (Option B) or selecting all items on a particular day or week (Option D).

Question 12

A primary difference in comparing the resulting misstatements analyzed after using statistical methods compared to those using non-statistical methods is that

Accepted Answer

Statistical methods determine the most likely misstatement while nonstatistical methods determine misstatements by projecting the misstatement found in the sample back to the population.

Question 13

Encountering misstatements in the sampling process
Explain the term "misstatement" as it applies to sampling during substantive procedures and explain how the term may be interpreted differently by different auditors.

Accepted Answer

The answer of Encountering misstatements in the sampling process
Explain the...

Question 14

When using MUS sampling,the auditor will use which of the following formulas to determine maximum sample size?

Accepted Answer

MUS (Monetary Unit Sampling) is a statistical sampling technique in which items in a population are sampled based on their monetary value, rather than a simple random sample. The formula for determining the maximum sample size in MUS is n = Population book value/Sampling interval. Therefore, the correct answer is C. Option A is incorrect because it uses the population market value, which is not relevant to MUS sampling. Option B is incorrect because it uses the population interval, which is not used in MUS sampling. Option D is incorrect because it uses the sample book value, which is not relevant for determining the maximum sample size.

Question 15

In testing the reasonableness of account balances,MUS sampling is preferred because it provides a smaller sample size.Which of the following are limitations of using the MUS sampling method?

Accepted Answer

MUS sampling is limited because it primarily tests for overstatements, struggles with zero and negative balances, and can be inefficient with numerous misstatements.

Question 16

Risks of sampling in tests of controls
Define the following terms as they relate to sampling for tests of controls:
 1.   tolerable failure rate
2.  expected failure rate
3.   allowance for s mpling error

Accepted Answer

The answer of Risks of sampling in tests of controls
Define...

Question 17

Which one of the following is a proper course of action for the auditor when the upper misstatement limit exceeds the tolerable misstatement?

Accepted Answer

When the upper misstatement limit exceeds the tolerable misstatement, the auditor can take multiple actions, including asking the client to correct known misstatements, analyzing detected misstatements for common issues, and expanding the sample to gather more evidence.

Question 18

When the results of sample testing conclude that there is misstatement in excess of the tolerable misstatement the auditor will usually:

Accepted Answer

If sample testing reveals a misstatement in excess of the tolerable misstatement, the auditor will propose adjustments to the client. This is done to ensure that the financial statements are corrected and properly reflect the company's financial position. The other options are not appropriate in this scenario. A disclaimer of opinion is issued when the auditor cannot obtain sufficient evidence to form an opinion on the financial statements. Throwing out the sample would not solve the issue and could lead to incomplete and inaccurate financial statements. Disclosing the misstatement in the financial statements without proposing adjustments would not correct the misstatement.

Question 19

When an auditor uses MUS and analyzes misstatements in the lower stratum,the book value will be compared to the audit results in order to derive the:

Accepted Answer

The tainting percentage is derived by comparing the book value to the audit value in the lower stratum when using Monetary Unit Sampling (MUS).

Question 20

In testing for the reasonableness of an account balance,if MUS sampling cannot be used because of its limitations,what is an alternative statistical method?

Accepted Answer

Mean-per-unit sampling is an alternative statistical method for testing the reasonableness of an account balance when MUS cannot be used because of its limitations. Attribute sampling and discovery sampling are not relevant in this context.

Quiz 8: Tools Used in Gathering Audit Evidence