Question 1

Which of the following is most correct when using audit sampling for exception rates?
A)Auditor is concerned with the lowest rate.
B)Auditor is concerned with the highest rate.
C)Auditor is concerned with the average on previous audits.
D)This doesn't impact the auditor's decision.

Accepted Answer

When using audit sampling for exception rates, the auditor is concerned with the highest possible exception rate. This rate will indicate the highest level of risk and will need to be addressed and investigated further. The lowest rate may not be as significant and may not require as much attention. The average from previous audits may provide some context, but it should not be the sole determining factor in the current audit.

Question 2

Which of the following occurrences would be least likely to warrant further audit attention for the auditor?
A)Deviations from client's established control procedures
B)Deviations from client's budgeted values
C)Monetary misstatements in populations of transaction data
D)Monetary misstatements in populations of account balance details

Accepted Answer

Deviations from budgeted values may be caused by a variety of reasons and may not necessarily indicate errors or fraud. However, the other options (A, C, and D) involve potential errors or fraud that would warrant further audit attention.

Question 3

Which of the following is a correct statement regarding block sampling?
A)It is acceptable to use block sampling only if a reasonable number of blocks are used.
B)Block sampling uses sampling with replacement.
C)Block sampling is a probabilistic sampling method.
D)There is considerable cost and time involved when block sampling is used.

Accepted Answer

It is important to use a reasonable number of blocks in block sampling to ensure representativeness and reduce bias. Using too few blocks can lead to unreliable results. The other options are incorrect as block sampling uses sampling without replacement, is a non-probabilistic sampling method, and may not necessarily be more costly or time-consuming than other sampling methods.

Question 4

Which of the following methods of sample selection is appropriately used when selecting a random sample?
A) 
B) 
C) 
D)

Accepted Answer

A random sample should have equal chance of selection for each member of the population. The options presented are random and do not provide any indication of bias, but option B is the only one that uses a different number in the fourth grouping of digits, which increases randomness.

Question 5

Which of the following statements regarding block sampling is least likely to be true?
A)Block sampling is the selection of several items in sequence.
B)It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks is used.
C)Only one block should be selected to increase the probability of a representative sample.
D)Once the first item in the block is selected, the remainder of the block is chosen automatically.

Accepted Answer

Selecting only one block would decrease the probability of obtaining a representative sample. In block sampling, it is recommended to select multiple blocks to increase the likelihood of obtaining a representative sample. Therefore, statement C is the least likely to be true.

Question 6

In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start.The primary disadvantage of this technique is population items:
A)may occur twice in the sample.
B)must be reordered in a systematic pattern before the sample can be drawn.
C)may occur in a systematic pattern, thus negating the randomness of the sample.
D)must be replaced in the population after sampling to permit valid statistical inference.

Accepted Answer

The primary disadvantage of using systematic sample selection with a random start is that population items may occur in a systematic pattern, which can negate the randomness of the sample. This can result in a biased sample that does not accurately represent the population. Therefore, it is important to consider this limitation when using this sampling technique and to take steps to minimize the impact of any systematic patterns that may be present in the population.

Question 7

Simple random sampling:
A)is used when there is a need to emphasize one or more types of population items.
B)requires both input and output parameters to be set when using a random number generator.
C)is generally used with replacement sampling.
D)is a probabilistic sampling method.

Accepted Answer

Simple random sampling is a probabilistic sampling method where every item in the population has an equal chance of being selected for the sample. It does not require any emphasis on specific types of population items and can be used without replacement, although it is typically used with replacement to maintain equal probabilities for each item. Input and output parameters may be used with a random number generator to facilitate the selection process, but they are not strictly necessary for the method to be considered simple random sampling.

Question 8

When a population is divided into subpopulations, usually by dollar size, and larger samples are taken from the subpopulation with the larger sizes, ________ is being used.
A)sampling with probability proportional to size
B)stratified sampling
C)block sampling
D)haphazard sampling

Accepted Answer

The answer of When a population is divided into subpopulations,...

Question 9

Nonprobabilistic sampling methods are not based on mathematical probabilities and therefore the representativeness of the sample may be difficult to determine.

Accepted Answer

Nonprobabilistic sampling methods such as convenience sampling or purposive sampling do not use mathematical probabilities to select participants and therefore it is difficult to determine the representativeness of the sample.

Question 10

In using audit sampling for exception rates:
A)the auditor wants to know the most the exception rate is likely to be.
B)sampling error is the likelihood that the auditor will miss a monetary misstatement.
C)the upper limit of the interval estimate is known as the sampling risk.
D)CUER cannot be considered in the context of specific audit objectives.

Accepted Answer

In using audit sampling for exception rates, the auditor wants to know the most the exception rate is likely to be. This is done by calculating the upper limit of the interval estimate, which is the maximum expected exception rate in the population. The auditor can then compare this to the tolerable exception rate to determine whether the control is effective or not. Sampling error refers to the potential for the sample to not be representative of the population, so B is incorrect. The upper limit of the interval estimate is not the same as sampling risk (which is the risk of reaching the wrong conclusion based on the sample), so C is incorrect. CUER (Cumulative Unidentified Error Rate) can be considered in the context of specific audit objectives, so D is incorrect.

Question 11

Although systematic sample selection is easy to use, its primary disadvantage is that it is not a probabilistic sampling method.

Accepted Answer

Systematic sampling is a probabilistic sampling method, where each member of the population has a known and equal chance of being selected.

Question 12

You are determining the significance of the following: you set a 5% risk of assessing control risk to low and your computation of the upper deviation risk is 7%.What could you conclude?
A)There is a 95% chance the deviation rate is the population is less than 5%.
B)There is a 5% chance the deviation rate in the population is less than 7%.
C)There is a 95% chance the deviation rate in the population exceeds 95%.
D)There is a 5% chance the deviation rate in the population exceeds 7%.

Accepted Answer

The upper deviation risk is 7%, which is greater than the 5% risk of assessing control risk to low. This means that there is a 5% chance that the deviation rate in the population exceeds 7%.

Question 13

When the auditor goes through a population and selects items using nonprobabilistic selection methods, without regard to their size, source, or other distinguishing characteristics, it is called:
A)block sample selection.
B)haphazard selection.
C)systematic sample selection.
D)statistical selection.

Accepted Answer

Haphazard selection is a nonprobabilistic selection method where the auditor selects items without any plan or pattern. The auditor may simply choose items that are convenient or easily accessible, without any consideration for their size, source, or other relevant characteristics. This method is not as rigorous or reliable as probabilistic selection methods, but it can be useful when the population is small or when time and resources are limited. Block sample selection is a type of probabilistic selection method where the population is divided into homogenous subgroups (or blocks), and a sample is randomly selected from each block. Systematic sample selection is also a type of probabilistic selection method where items are selected based on a predetermined pattern or interval, such as every fifth item. Statistical selection uses statistical techniques to determine the sample size and selection criteria, and is typically used for larger populations with less variability.

Question 14

Which of the following statements is correct when dealing with sampling for exception rates?
A)The term exception refers to both deviations from the client's control procedures and amounts that are not monetarily correct.
B)When used with sampling, the term deviation is synonymous with the term exception.
C)The actual population exception rate is the same as the sample exception rate.
D)In using audit sampling for exception rates, the auditor is most concerned with the confidence interval.

Accepted Answer

The answer of Which of the following statements is correct...

Question 15

What is the key advantage and disadvantage associated with systematic sample selection?
 How must auditors address this disadvantage?

Accepted Answer

The answer of What is the key advantage and disadvantage...

Question 16

Describe each of the four types of sample selection methods commonly associated with statistical audit sampling.

Accepted Answer

The answer of Describe each of the four types of...

Question 17

When selecting a sample, random numbers may be obtained either with replacement or without replacement.Although both selection methods are theoretically sound, auditors rarely use replacement sampling.

Accepted Answer

Auditors typically prefer to use sampling without replacement to ensure that each item in the population has an equal chance of being selected and to avoid duplication in the sample. With replacement sampling, an item could potentially be selected more than once, which could bias the sample results.

Question 18

The most serious shortcoming of the haphazard sample selection method is:
A)it is not subject to statistical sampling methods.
B)it is time consuming to use.
C)it is costly to use.
D)it is difficult to remain completely unbiased in the selection.

Accepted Answer

The most serious shortcoming of haphazard sample selection is that it is difficult to remain completely unbiased in the selection. Haphazard sampling relies on the researcher's judgment and can be influenced by personal biases or preferences, leading to an unrepresentative sample. Other methods such as random sampling or stratified sampling are more likely to produce a representative sample and minimize bias.

Question 19

The advantage of systematic sample selection is that:
A)it is easy to use.
B)there is limited possibility of it being biased.
C)it is unnecessary to determine if the population is arranged randomly.
D)it automatically selects items material to the financial statements.

Accepted Answer

The answer of The advantage of systematic sample selection is...

Question 20

The highest estimated exception rate in the population at a particular acceptable risk of assessing control risk too low is:
A)the upper exception rate.
B)estimated population exception rate.
C)the computed upper exception rate.
D)the tolerable exception rate.

Accepted Answer

The computed upper exception rate is the highest estimated exception rate in the population at a particular acceptable risk of assessing control risk too low.

Quiz 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Which of the following is most correct when using audit sampling for exception rates?

Which of the following occurrences would be least likely to warrant further audit attention for the auditor?

Which of the following is a correct statement regarding block sampling?

Which of the following methods of sample selection is appropriately used when selecting a random sample?

Which of the following statements regarding block sampling is least likely to be true?

In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start.The primary disadvantage of this technique is population items:

Simple random sampling:

When a population is divided into subpopulations, usually by dollar size, and larger samples are taken from the subpopulation with the larger sizes, ________ is being used.

Nonprobabilistic sampling methods are not based on mathematical probabilities and therefore the representativeness of the sample may be difficult to determine.

In using audit sampling for exception rates:

Although systematic sample selection is easy to use, its primary disadvantage is that it is not a probabilistic sampling method.

You are determining the significance of the following: you set a 5% risk of assessing control risk to low and your computation of the upper deviation risk is 7%.What could you conclude?

When the auditor goes through a population and selects items using nonprobabilistic selection methods, without regard to their size, source, or other distinguishing characteristics, it is called:

Which of the following statements is correct when dealing with sampling for exception rates?

What is the key advantage and disadvantage associated with systematic sample selection? How must auditors address this disadvantage?

Describe each of the four types of sample selection methods commonly associated with statistical audit sampling.

When selecting a sample, random numbers may be obtained either with replacement or without replacement.Although both selection methods are theoretically sound, auditors rarely use replacement sampling.

The most serious shortcoming of the haphazard sample selection method is:

The advantage of systematic sample selection is that:

The highest estimated exception rate in the population at a particular acceptable risk of assessing control risk too low is: