Question 1

Under monetary unit sampling,the sampling interval is determined by dividing the _____ by the _____.

Accepted Answer

The answer of Under monetary unit sampling,the sampling interval is...

Question 2

What is the projected misstatement?

Accepted Answer

The projected misstatement is calculated based on the sample results and the total population. In this context, $15,000 is likely the correct projection based on the given options.

Question 3

Using an incremental confidence factor of 1.58 (corresponding to the risk of incorrect acceptance of 10 percent),what is the incremental allowance for sampling risk?

Accepted Answer

The incremental allowance for sampling risk is calculated by multiplying the incremental confidence factor (1.58) by the standard deviation of the sample. In this case, the calculation results in $8,700.

Question 4

Which of the following components of the upper limit on misstatements will exist in all monetary unit sampling applications,even in those where no misstatements are found?

Accepted Answer

The basic allowance for sampling risk is always present in the upper limit on misstatements calculation regardless of whether any actual misstatements are found in the sample or not. It is an inherent part of the statistical sampling process and represents the risk that a misstatement exists in the population that was not detected in the sample. The computed allowance for sampling risk and incremental allowance for sampling risk are only present if misstatements are found in the sample, while the projected misstatement is only present if there are actual misstatements found and projected to the entire population.

Question 5

Which of the following is not considered in establishing the sample size in a monetary unit sampling application?

Accepted Answer

All of the options listed (expected misstatement, population size, and risk of incorrect acceptance) are considered when establishing the sample size in a monetary unit sampling application.

Question 6

Which of the following expresses the relationship between changes in the factors and changes in sample size in variables sampling?

Accepted Answer

The answer of Which of the following expresses the relationship...

Question 7

Which of the following factors that affect sample size can be determined by considering the recorded account balance of the account or class of transactions as well as the relationship between the recorded account balance or class of transactions with important financial statement subtotals?

Accepted Answer

Tolerable misstatement is determined by considering the recorded account balance of the account or class of transactions as well as the relationship between the recorded account balance or class of transactions with important financial statement subtotals.

Question 8

Which of the following factors has a direct relationship with sample size in a variables sampling application?

Accepted Answer

Sample size in variables sampling is directly related to the expected misstatement, but not to the tolerable misstatement. Therefore, the correct choice is B, where the answer is "No" for Tolerable misstatement and "Yes" for Expected misstatement.

Question 9

What is the appropriate sampling interval?

Accepted Answer

The answer of What is the appropriate sampling interval?
...

Question 10

All other factors being equal,as the risk of incorrect acceptance and tolerable misstatement increase,the sample size will:

Accepted Answer

As the risk of incorrect acceptance and tolerable misstatement increase, the auditor can accept a larger margin of error, which allows for a smaller sample size.

Question 11

Which of the following set of conditions would provide the auditor with the smallest sample size under monetary unit sampling (RIA = risk of incorrect acceptance,EM = expected misstatement,TM = tolerable misstatement,PS = population size)?

Accepted Answer

The formula for determining sample size in monetary unit sampling is:

Sample size = (PS x EM) / (TM x RIA)

Therefore, in order to have the smallest sample size, we want to minimize the numerator and maximize the denominator. This means we want a smaller expected misstatement (EM) and larger tolerable misstatement (TM) and population size (PS). Out of the given choices, option C has the smallest expected misstatement ($2,000), which will result in a smaller sample size. The other options have larger expected misstatements and/or smaller tolerable misstatements and/or population sizes, which will lead to larger sample sizes.

Question 12

A number of factors influence the sample size for a variables sampling application.All other factors held constant,which of the following would lead to a larger sample size?

Accepted Answer

Lower levels of tolerable misstatement mean that the auditor is allowing less room for error in the financial statements. This would lead to a larger sample size as the auditor would need to gather more evidence to have a higher level of confidence in the accuracy of the financial statements.

Question 13

Which of the following factors is most likely established based on the results of prior audit examinations?

Accepted Answer

Expected misstatement is a factor that is typically determined based on the results of prior audit examinations. It represents the amount of potential misstatement that the auditor would expect to find in the current period based on past experience. The other factors listed (population size, risk of incorrect acceptance, and tolerable misstatement) are important considerations in the audit process, but are typically established through other means such as risk assessment procedures or client discussions.

Question 14

What is the auditor's normal course of action if a "logical unit" is selected twice in monetary unit sampling?

Accepted Answer

If a logical unit is selected twice in monetary unit sampling, the auditor should count it as two selections and proceed as normal. This ensures that the sample remains representative of the population and reduces the risk of under or oversampling.

Question 15

Which of the following components of the upper limit on misstatements is determined by multiplying the sampling interval by the confidence factor for the acceptable risk of incorrect acceptance?

Accepted Answer

The basic allowance for sampling risk is determined by multiplying the sampling interval by the confidence factor for the acceptable risk of incorrect acceptance.

Question 16

The amount by which a projected misstatement in an account balance or class of transactions differs from an actual misstatement as a result of the sample not being representative of the population would typically arise from:

Accepted Answer

The amount by which a projected misstatement differs from an actual misstatement due to the sample not being representative is known as sampling risk. This is a common risk associated with audit sampling and arises due to the possibility of selecting a sample that is not fully representative of the population being tested. Therefore, option B is the correct choice.

Question 17

How does the auditor establish the level of tolerable misstatement in a variables sampling application?

Accepted Answer

The auditor establishes the level of tolerable misstatement based on the recorded amount of the account balance and its relationship with important financial statement subtotals, as this helps determine the significance of potential misstatements in the context of the overall financial statements.

Question 18

Brown,CPA,was using monetary unit sampling to audit an inventory of $3,000,000 that was comprised of 6,000 items.A sample size of 500 was determined and a tolerable misstatement of $20,000 was established.The sampling interval would be:

Accepted Answer

The answer of Brown,CPA,was using monetary unit sampling to audit...

Question 19

Which of the following is found by dividing the amount of misstatement noted in a logical unit by the recorded amount of that logical unit?

Accepted Answer

The tainting percentage is calculated by dividing the amount of misstatement by the recorded amount of the logical unit.

Question 20

In a classical variables sampling application,the sample size will be smaller when the:

Accepted Answer

A smaller sample size is needed when the population variability is lower because there is less variation to account for, making it easier to estimate the population characteristics accurately.

Quiz 19: Variables Sampling

Under monetary unit sampling,the sampling interval is determined by dividing the _ by the _.