Question 1

In monetary-unit sampling, items containing large understatement errors:

Accepted Answer

In monetary-unit sampling, items with large understatement errors may have a small recorded value due to those errors, which affects their probability of being selected in the sample.

Question 2

A frequency distribution of the results of all possible samples of a specified size that could be obtained from a population containing some specific parameter is the:

Accepted Answer

A frequency distribution of the results of all possible samples of a specified size that could be obtained from a population containing some specific parameter is the sampling distribution. The population distribution refers to the distribution of the entire population, not just the samples. Sample size refers to the number of observations in a single sample, not the frequency distribution of all possible samples. Sample deviation rate is not a commonly used term in statistics.

Question 3

When using monetary-unit sampling, the recorded dollar population is a definition of the:

Accepted Answer

Monetary-unit sampling focuses on the total dollar value of the population for auditing purposes, thus the recorded dollar population refers to the total value of all items in the population, defining the population size in monetary terms.

Question 4

The point estimate, by itself, is NOT an adequate measure of the population misstatement because of:

Accepted Answer

The point estimate is only a single value that is based on a sample, and therefore it is subject to sampling error. Sampling error occurs because a sample is only a subset of the population, and therefore there is always some degree of uncertainty in the estimate of the population characteristic. Therefore, the point estimate alone is not an adequate measure of the population misstatement.

Question 5

Monetary-unit sampling is most commonly used when:

Accepted Answer

Monetary-unit sampling is most commonly used when a dollar result is desired, zero or few exceptions are expected, and the population data are maintained on computer files.

Question 6

An accounts receivable population contains a total of 4 customers.The accounts, amounts, and cumulative total are shown in the following table:
$\begin{array}{ccc}
\text { Account Number } & \text { Recorded Amount } & \text { Cumulative Total } \
\hline \text { Blue } & \$ 357 & \$ 357 \
\hline \text { Brown } & 281 & 638 \
\hline \text { Grey } & 60 & 698 \
\hline \text { Green } & 574 & 1272 \
\hline
\end{array}$
If monetary-unit sampling is used, what is the population size?

Accepted Answer

The population size in monetary-unit sampling refers to the total value of all items in the population, which is \$1272 as indicated by the cumulative total of the last account.

Question 7

When using monetary-unit sampling, evaluating the likelihood of unrecorded items in the population is:

Accepted Answer

The answer of When using monetary-unit sampling, evaluating the likelihood...

Question 8

If an auditor, planning to use statistical sampling, is concerned with the dollar value of mathematical errors in sales invoices, the auditor would most likely NOT utilise:

Accepted Answer

Sampling for attributes is used to estimate the proportion of a population that possesses a specific characteristic, such as the presence or absence of errors. It is not suitable for estimating the dollar value of errors, which is the auditor's concern in this scenario. Sampling for variables, stratified random sampling, and random sampling are more appropriate for estimating monetary amounts.

Question 9

For monetary-unit sampling, normally the estimate of the population deviation rate is:

Accepted Answer

Monetary-unit sampling assumes that errors are evenly distributed throughout the population, which means that the population deviation rate should be close to 0% if the sample is representative. If the population deviation rate is higher than 0%, it may indicate a sampling error or a systematic issue that needs to be addressed. Therefore, choice B is the best option.

Question 10

An auditor using non-statistical sampling cannot:

Accepted Answer

Non-statistical sampling does not allow for the mathematical measurement of the precision of the point estimate, as it does not involve the use of statistical techniques to measure sampling risk.

Question 11

The most commonly used method of statistical sampling for tests of details of balances is:

Accepted Answer

Monetary-unit sampling is the most commonly used method of statistical sampling for tests of details of balances. It involves selecting individual monetary units from within the population and testing them for misstatement, which allows for a more representative sample and greater efficiency in the audit process. Discovery sampling, variables sampling, and attributes sampling are all alternative methods of statistical sampling that may be used depending on the specific circumstances of the audit.

Question 12

The major difference between monetary-unit sampling (MUS)and attributes sampling is that in MUS, the:

Accepted Answer

The major difference between monetary-unit sampling and attributes sampling is that in monetary-unit sampling, the measure is in dollars. This means that MUS involves selecting a sample of individual monetary units (e.g. invoices or transactions) and then testing them for monetary errors. In contrast, attributes sampling involves selecting a sample of items and testing them for the presence or absence of a particular attribute (e.g. compliance with a control procedure). So, the correct choice is C.

Question 13

The auditor must deal with layers of the computed upper deviation rate (CUDR)from the attributes table because there are different error assumptions for each error.Assume a sample of 100 had found 1 error, and the computed upper deviation rate is shown in the following table:

What is the CUDR layer for the first mistake?

Accepted Answer

The answer of The auditor must deal with layers of...

Question 14

The appropriate assumption to make regarding the overall percent of error in those population items containing an error is:

Accepted Answer

The appropriate assumption regarding the overall percent of error in population items containing an error is often based on the auditor's personal judgment in the circumstances. This judgment takes into account the auditor's understanding of the entity, its environment, and its internal control system, as well as the auditor's professional experience and insights into similar audits. While statistical analysis, random number tables, and an analysis of the client's internal control system can inform this judgment, the final assumption about the error rate is ultimately a matter of professional judgment.

Question 15

An example of sampling for attributes would be estimating the:

Accepted Answer

Sampling for attributes involves assessing the presence or absence of a specific characteristic or attribute within a population. In this case, we are estimating the percentage of sales invoices with no accompanying shipping documents, which is an attribute. The other options involve quantitative measures (such as probability, quantity, and dollar value), which would require sampling for variables.

Question 16

Whenever a statistical method is used, a decision rule determines whether the population is acceptable.The decision rule for monetary-unit sampling is 'Accept the conclusion that the book value is NOT misstated by a material amount if:

Accepted Answer

The decision rule for monetary-unit sampling is to accept that the book value is not materially misstated if both the lower and upper misstatement bounds fall between the understatement and overstatement tolerable misstatement amounts.

Question 17

Which one of the following is NOT a problem with monetary-unit selection?

Accepted Answer

The answer of Which one of the following is NOT...

Question 18

A statistical method used to estimate the proportion of items in a population containing a characteristic of interest is:

Accepted Answer

The method used to estimate the proportion of items in a population containing a characteristic of interest is attributes sampling. Attributes sampling is used when the characteristic of interest is a non-measurable attribute, and it involves classifying the items in the population as either possessing or not possessing the attribute of interest.

Question 19

Which one of the following statements regarding monetary-unit sampling (MUS)is NOT true?

Accepted Answer

The sampling unit in monetary-unit sampling (MUS) is actually the individual dollar (or other currency unit), not the account balance as a whole. This method inherently emphasizes larger balances because each dollar has an equal chance of selection, meaning larger balances contribute more dollars (and thus more chances) to the sample.

Question 20

Before the population can be considered acceptable based on the acceptable risk of assessing control risk too low (ARO), the computed upper deviation rate (CUDR)must be __________ the tolerable deviation rate (TDR).

Accepted Answer

The tolerable deviation rate (TDR) is the maximum deviation rate that the auditor is willing to accept and still conclude that the control is effective. If the computed upper deviation rate (CUDR) is less than or equal to the TDR, then the auditor can conclude that the assessed control risk is acceptable based on the acceptable risk of assessing control risk too low (ARO). Therefore, the correct answer is C - "less than or equal to."

Quiz 14: Audit sampling