Question 1

In using MUS, once the auditor has determined the sample size, which of the following is needed to determine the sampling interval?

Accepted Answer

The sampling interval is determined by dividing the population size by the sample size. Therefore, the population size is necessary to determine the sampling interval. The expected misstatement, tolerable misstatement, and mean are used to calculate the sample size, not the sampling interval.

Question 2

In attribute sampling, which of the following does the risk of incorrect acceptance deal with?

Accepted Answer

The risk of incorrect acceptance in attribute sampling deals with effectiveness, as it refers to the risk that the sample supports a conclusion that the control is operating effectively when it is not.

Question 3

In selecting a sample for attribute testing, systematic selection involves which of the following approaches?

Accepted Answer

Systematic selection involves selecting every nth item after a random start. This approach ensures that the sample is representative of the population and reduces the risk of bias. Option A (equal chance of selection) refers to simple random sampling, option C (arbitrary selection) is not a systematic approach, and option D (selecting all items on a day or week) is not a sampling technique, but rather a census.

Question 4

Which of the following is not a type of statistical method that provides results in dollar terms?

Accepted Answer

Attributes sampling and its various methods provide results in terms of the proportion of items in a sample that meet a specific attribute criteria (such as defective or non-defective), rather than providing results in dollar terms. Variables sampling, monetary unit sampling, and probability proportional to size sampling all provide results in dollar terms.

Question 5

When an auditor uses MUS and analyzes misstatements in the lower stratum, which of the following will be multiplied by the sampling interval to calculate the projected misstatement for each misstated item?

Accepted Answer

The tainting percentage is multiplied by the sampling interval to calculate the projected misstatement for each misstated item. The audit value and tolerable misstatement are used in determining the sample size and the upper limit for misstatement, but not in calculating the projected misstatement for each misstated item.

Question 6

Sampling risk deals with which of the following?

Accepted Answer

Sampling risk refers to the risk that the auditor draws an incorrect conclusion about a population based on the sample results. Choice A refers to performance risk, which is the risk of not performing appropriate audit procedures. Choice C refers to detection risk, which is the risk that the auditor fails to detect material misstatements. Therefore, the best answer is B.

Question 7

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

Accepted Answer

Classical variables sampling is the best alternative method in such a scenario. It is a statistical sampling method that selects items for testing based on their dollar value or other quantitative factors, rather than using a random sample like MUS sampling. This approach can be used to test the reasonableness of an account balance when the limitations of MUS sampling make it impractical or ineffective. Attribute sampling is used to test for the presence of a specific attribute in a population, while Discovery sampling is an exploratory method used to identify potential issues or areas of concern.

Question 8

Which of the following is a major disadvantage of MUS sampling?

Accepted Answer

MUS sampling is not effective for detecting understatements because it is based on monetary units, which means it is more likely to select larger balances, potentially missing smaller understated amounts.

Question 9

In MUS, what is meant by a sampling interval of 900?

Accepted Answer

In Monetary Unit Sampling (MUS), a sampling interval of 900 means that every 900th dollar in the population is selected for testing, not every 900th item.

Question 10

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

Accepted Answer

Monetary Unit Sampling (MUS) is primarily designed to focus on larger value items, as it selects items for testing based on their monetary value. This means it inherently targets items that are more likely to have errors of significance to the audit. However, because it is value-weighted, MUS does not inherently ensure that negative balances or zero balances are included in the sample. Including such items often requires specific additional procedures or adjustments to the sampling approach.

Question 11

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

Accepted Answer

When the total estimated misstatement exceeds the tolerable misstatement, the auditor has to take additional steps to ensure the accuracy of the financial statements. The auditor can ask the client to correct the known misstatements, analyze the detected misstatements for some common problems, and expand the sample to identify further misstatements and evaluate the nature and cause of misstatements. Therefore, D is the best choice.

Question 12

In attribute sampling, the risk of incorrect rejection deals with which of the following?

Accepted Answer

The risk of incorrect rejection affects the efficiency of an audit, as it may lead to unnecessary additional testing or procedures.

Question 13

When evaluating the MUS sample results, the auditor calculates the total estimated misstatement in the account balance based on the sampling process using which of the following components?

Accepted Answer

The auditor calculates the total estimated misstatement in the account balance using all three components mentioned in the options: Basic Precision, Projected misstatement for items in lower-stratum, and Incremental Allowance for Sampling Error. Each component has a specific role in the calculation of the estimated misstatement, and together they provide a comprehensive assessment of the accuracy of the account balance. Therefore, the best choice is D, All of the above.

Question 14

In selecting a sample for attribute testing, block sampling involves which of the following approaches?

Accepted Answer

Block sampling involves selecting all items within a specific time period, such as a day or week, rather than randomly or systematically across the entire population.

Question 15

Attribute sampling is used in which of the following situations?

Accepted Answer

Attribute sampling is used for testing rates of deviations of controls to determine if they are operating effectively. This type of sampling is useful in determining the overall effectiveness of a control, rather than assessing the accuracy of a dollar amount or estimating an amount. Therefore, option B and C can be eliminated. Option D is incorrect because attribute sampling is not used for testing the reasonableness of account balances.

Question 16

Which of the following are limitations of using the MUS sampling method?

Accepted Answer

All of the options are limitations of using the MUS sampling method. MUS is most effective in testing for overstatements, therefore not very useful in testing for understatement. Additionally, MUS is not designed to test for zero and negative amounts, and if numerous misstatements are expected, alternative sampling methods should be considered.

Question 17

Which of the following is a factor of nonsampling risk?

Accepted Answer

Nonsampling risk is the risk that arises from factors other than sampling in an audit. Not carrying out the appropriate audit procedure is an example of nonsampling risk. The other options listed are related to sampling risk.

Question 18

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

Accepted Answer

Generalized Audit Software (GAS) is designed to perform a wide range of data analysis tasks, including footing a file, obtaining file statistics, checking for gaps in processing sequences, and preparing custom reports. Therefore, all the tasks listed can be performed using GAS.

Question 19

In selecting a sample for attribute testing, haphazard selection involves which of the following approaches?

Accepted Answer

Haphazard selection involves selecting a sample in a random but not necessarily systematic way, without any conscious bias. Therefore, the best choice in this context is C, which describes an arbitrary selection with no conscious bias. A, B, and D involve specific rules or biases in the selection process, which would not be appropriate for haphazard selection.

Question 20

That auditor will do which of the following when the results of sample testing conclude that there is misstatement in excess of the tolerable misstatement?

Accepted Answer

If sample testing concludes that there is a misstatement in excess of the tolerable misstatement, the auditor will propose adjustments to the client to correct the misstatement. This is done to ensure that the financial statements are presented fairly and accurately, and to maintain the integrity of the audit process. The other choices are not appropriate actions in this scenario. A disclaimer of opinion would be issued only if the auditor is unable to obtain sufficient evidence to support the financial statements. Throwing out the sample would not address the misstatement or provide a solution. Disclosing the misstatement in the financial statements would be misleading if no corrective actions have been taken.

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