Question 1

Which of the phrases below completes the statement? ?
Audit sampling is the application of audit procedures to __________ such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.

Accepted Answer

Audit sampling involves examining less than 100% of a population to make inferences about the entire population, ensuring each item has a chance of being selected.

Question 2

The audit manager has asked you to review the results of some statistical sampling testing, which resulted in 20 per cent of the payables balance being tested. Materiality has been set at €100,000. The testing results indicate that there is a €45,000 error in the sample: €20,000 which is due to invoices not being recorded in the correct period as a result of weak controls and additionally there is a one-off error of €25,000 which was made by a temporary clerk.
 What would be an appropriate course of action on the basis of these results?

Accepted Answer

The control error should be projected across the whole population to estimate the total potential misstatement, as it indicates a systematic issue. The one-off error should be considered separately.

Question 3

The auditor may decide that it would be more appropriate to examine the entire population (100 per cent examination) of items that make up an account balance if the population comprises a small number of large value items.

Accepted Answer

If the population consists of a small number of large value items, examining the entire population can provide more assurance and reduce the risk of missing significant errors or misstatements.

Question 4

Audit software can be used to select balances for testing from a large population.

Accepted Answer

Audit software can be used to select samples or balances for testing from a large population by applying statistical sampling techniques and criteria set by the auditor.

Question 5

The lower the tolerable error the greater the sample size.

Accepted Answer

A lower tolerable error means a more precise estimate is needed, which requires a larger sample size to achieve the desired level of accuracy.

Question 6

Attribute sampling requires only two responses - yes or no.

Accepted Answer

Attribute sampling is a method used to determine the presence or absence of a characteristic, typically requiring binary responses like "yes" or "no".

Question 7

Which of the phrases below completes the statement? ? Sampling risk is the risk that the auditor's conclusion based on a sample may __________ the conclusion if the entire population were subjected to the same audit procedure. ?

Accepted Answer

Sampling risk refers to the possibility that the sample chosen by the auditor does not accurately represent the entire population, leading to a conclusion that may differ from what would be concluded if the entire population were tested.

Question 8

Which of the following sampling methods correctly describes systematic sampling?

Accepted Answer

Systematic sampling involves selecting samples based on a fixed, periodic interval, with the starting point chosen randomly.

Question 9

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

Accepted Answer

Selective sampling is not a recognized type of statistical sampling; it is not a standard term used in statistical methodologies.

Question 10

Does judgemental sampling entail: ?

Accepted Answer

Judgemental sampling involves using personal experience and professional discretion to select specific items from a population, often focusing on unusual or significant items.

Question 11

Which of the following statements is not correct about materiality?

Accepted Answer

At the planning stage, the auditor considers materiality at both the financial statement level and the account balance, class of transactions, or disclosure level, not just at the financial statement level.

Question 12

Monetary Unit Sampling (also known as Value Weighted Selection) is a statistical sampling method which is useful when sampling populations where the individual balances can vary widely in size
Here is a selection from a list of Receivables balances for Wibble:
 The sampling size is 100 items.
Which balances will be selected for testing out of the ones shown?

Accepted Answer

The answer of Monetary Unit Sampling (also known as Value...

Question 13

Audit sampling is one component of audit risk the auditor has to pay special attention to.

Accepted Answer

The answer of Audit sampling is one component of audit...

Question 14

Monetary Unit Sampling will tend to include higher value balances in the sample to be tested.

Accepted Answer

Monetary Unit Sampling (MUS) is a sampling method that gives higher probability of selection to larger monetary units, thus higher value balances are more likely to be included in the sample.

Question 15

Stratified sampling divides the population into layers to identify higher value transactions.

Accepted Answer

The answer of Stratified sampling divides the population into layers...

Question 16

Auditors will accept a 5 per cent error rate in a sample as being reasonable.

Accepted Answer

The answer of Auditors will accept a 5 per cent...

Quiz 12: Sampling and Materiality

Which of the phrases below completes the statement? ? Audit sampling is the application of audit procedures to __________ such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.