Question 1

The greatest impact on audit efficiency comes from the risk(s) of:

Accepted Answer

D

Question 2

Of the following factors which would have the effect of decreasing sample size for tests of control?

Accepted Answer

Increasing the tolerable rate of deviation allows for more deviations before the control is considered ineffective, thus requiring a smaller sample size.

Question 3

An auditor may use sampling to obtain information about many different characteristics of a population.However, most audit samples lead either to an estimate of:

Accepted Answer

Most audit samples lead either to an estimate of a deviation rate or a dollar amount. This is because the auditor is typically trying to determine if there are any deviations (errors or fraud) in the population or if there are any material misstatements in the financial statements. The deviation rate or dollar amount helps the auditor determine the potential impact of these deviations on the financial statements. The other options (A, B, and C) may be relevant in some cases, but they are not as common as deviation rate or dollar amount.

Question 4

An advantage of using stratification is:

Accepted Answer

Using stratification allows for the auditor to focus on areas with higher risk or higher dollar amounts, which can increase audit efficiency.

Question 5

The steps in planning the sample are listed as follows:  Which one of the following shows steps A through E in the correct order?

Accepted Answer

The answer of The steps in planning the sample are...

Question 6

Which of these would not be considered to be a source of non-sampling risk?

Accepted Answer

Non-sampling risk arises from factors other than the size of the sample, such as errors in data collection or analysis. Inappropriate sample size is related to sampling risk, not non-sampling risk.

Question 7

Before selecting the sample for testing, it is necessary to plan what that sample will be.Which of these is not a step in planning the sample?

Accepted Answer

Considering qualitative aspects of the errors is not a step in planning the sample; it is more related to analyzing the results after the sample has been tested.

Question 8

Whenever sampling is used in an audit procedure, uncertainty will be present.The two sources of this uncertainty are:

Accepted Answer

Sampling risk arises from the possibility that the sample is not representative of the population, while non-sampling risk arises from factors not related to the sample, such as human error.

Question 9

Audit sampling is involved whenever an auditor:

Accepted Answer

The answer of Audit sampling is involved whenever an auditor:
...

Question 10

The least effective means of controlling non-sampling risk is:

Accepted Answer

Increasing the sample size primarily affects sampling risk, not non-sampling risk. Non-sampling risk is better controlled through quality control, supervision, and planning.

Question 11

Sample size is determined by the application of a statistically based formula which includes all of the following except:

Accepted Answer

The answer of Sample size is determined by the application...

Question 12

Which of the following is not a type of sampling risk?

Accepted Answer

Sampling risk typically involves the risk of overreliance and underreliance, which are related to the auditor's reliance on the sample results. The risk of incorrect decision is a broader concept, and risk of sample size is not a recognized type of sampling risk.

Question 13

The greatest impact on audit effectiveness comes from the risk(s) of:

Accepted Answer

Overreliance and incorrect acceptance pose the greatest risk to audit effectiveness because they may lead auditors to conclude that controls are effective or that financial statements are fairly stated when they are not, potentially resulting in undetected material misstatements.

Question 14

Before selecting a sample, it is necessary to specify the expected error.The main purpose for doing this is:

Accepted Answer

Specifying the expected error is important in determining sample size because it allows the auditor to calculate how large of a sample is needed to achieve a desired level of precision in the results. This is crucial in ensuring that the sample is representative of the entire population and that the auditor can draw reliable conclusions about the accuracy of the account being audited.

Question 15

Which of these would not be considered a method of audit sampling?

Accepted Answer

Block selection is not considered a method of audit sampling because it involves selecting a contiguous block of items, which may not provide a representative sample.

Question 16

The risk of concluding a material error does not exist when in fact it does, is also known as:

Accepted Answer

The risk of concluding a material error does not exist when in fact it does is known as the risk of incorrect acceptance. This occurs when an auditor fails to detect a material misstatement in the financial statements, resulting in an unqualified opinion when the financial statements are not fairly presented. The other options, such as overreliance and underreliance, relate to the level of reliance an auditor places on controls or substantive procedures, while incorrect rejection refers to the risk of concluding that a material error exists when one does not, resulting in a qualified or adverse opinion.

Question 17

In which of these audit procedures is sampling most likely to be used?

Accepted Answer

Sampling is most likely to be used in vouching, as it involves selecting a sample of transactions or documents to verify their accuracy and compliance with accounting standards.

Question 18

If the sample supports the conclusion that the recorded account balance is materially misstated when it is actually not materially misstated, this is the:

Accepted Answer

The risk of incorrect rejection refers to the risk that an auditor concludes that a material misstatement exists in a financial statement assertion when in fact it does not. This can lead to unnecessary additional work and testing by the auditor to substantiate their incorrect conclusion.

Question 19

The risk of concluding control risk is lower than it actually is, is also known as:

Accepted Answer

The risk of concluding control risk is lower than it actually is refers to the risk of overreliance. This means the auditor believes the controls are more effective than they actually are, potentially leading to less substantive testing than necessary.

Question 20

The statement that is most accurate about the terminology applied to errors identified when applying tests of controls or substantive testing to an audit sample is:

Accepted Answer

When testing controls, an error is referred to as a control deviation because it indicates a failure in the design or operation of the controls. When conducting substantive testing, an error is referred to as a misstatement because it indicates a material error in the financial statements. Option A and B are incorrect as they interchange the terminology used for substantive testing and testing of controls.

Quiz 12: Managing Audit Data