Question 1

If the expected deviation rate exceeds the tolerable deviation rate,the auditor is most likely to

Accepted Answer

The answer of If the expected deviation rate exceeds the...

Question 2

In determining the sample size for a test of controls,an auditor should consider the expected deviation rate,desired confidence level,and the

Accepted Answer

The tolerable deviation rate is the maximum rate of deviations the auditor is willing to accept without altering the planned reliance on controls, making it crucial in determining sample size.

Question 3

As a result of tests of controls,an auditor over relied on internal control and decreased substantive testing.This overreliance occurred because the true deviation rate in the population was

Accepted Answer

The answer of As a result of tests of controls,an...

Question 4

In which of the following cases would the auditor be most likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis?

Accepted Answer

When the tolerable deviation is small and expected deviation is high, it indicates a higher risk of misstatement, and therefore the auditor would be more likely to conclude that all items in the account should be examined rather than testing on a sample basis. This ensures a higher level of assurance in detecting any potential errors or fraud.

Question 5

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Accepted Answer

The answer of Which of the following factors does an...

Question 6

A control is deemed to be more important than thought at the time that attributes sampling parameters were set.The auditor is most likely to respond by

Accepted Answer

When a control is deemed more important than initially thought, the auditor would likely respond by decreasing the tolerable deviation rate. This adjustment reflects a lower tolerance for control deviations because the control is more critical to the audit's assessment of control risk.

Question 7

For an attributes sampling plan,the tolerable deviation rate is 4.5%,the computed upper deviation rate is 7%,the sample deviation rate is 3%,and the desired confidence level is 95%.What is the allowance for sampling risk included in the computed upper deviation rate?

Accepted Answer

The achieved allowance for sampling risk is 4%, which means that there is a 4% chance that the true deviation rate in the population is higher than the computed upper deviation rate. Since the tolerable deviation rate is 4.5%, and the computed upper deviation rate already includes the achieved allowance for sampling risk, we can conclude that the sampling plan has met the desired confidence level and the tolerable deviation rate. Therefore, no further action is necessary.

Question 8

Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor

Accepted Answer

Statistical sampling allows auditors to quantify the sufficiency of the evidential matter obtained by providing a measurable level of confidence in the results.

Question 9

Which of the following statements is correct concerning statistical sampling in compliance testing?

Accepted Answer

In compliance testing, the population size generally has little effect on sample size determination, except when dealing with very small populations. This is because the sample size is more influenced by the expected deviation rate and the tolerable deviation rate.

Question 10

If auditors conducting attributes sampling found that the entity deviated from a prescribed control in nine of the first 10 items examined,the auditor is most likely to

Accepted Answer

Given the high deviation rate found in the initial items examined, the auditor is likely to conclude that the control is not effective. Stopping the test and increasing control risk reflects the auditor's assessment that reliance on the control is not justified, making further testing of the control unnecessary.

Question 11

When testing automated IT controls,the auditor is most likely to do all of the following except:

Accepted Answer

Increasing sample size because the tolerable deviation rate tends to be higher for automated IT controls is not a recommended approach. The auditor should still apply the same sampling techniques and set the tolerable deviation rate based on the level of risk in the control. It is important to test a sufficient number of transactions to have a reasonable assurance that the control is functioning effectively. Therefore, B is the least likely activity.

Question 12

An auditor is testing internal control procedures that are evidenced on an entity's vouchers.To select the vouchers for testing,the auditor obtains random numbers between the first and last voucher number in the period.If a random number matches the number of avoided voucher,that voucher ordinarily should be replaced by another voucher in the random sample if the voucher

Accepted Answer

If a voucher has been properly voided, it does not need to be included in the sample because it has already been recognized as not being valid. Therefore, the auditor should replace it with another voucher in the random sample. Choices A, C, and D do not apply to properly voided vouchers.

Question 13

Statistical sampling provides a technique for

Accepted Answer

Statistical sampling allows auditors to measure the sufficiency of evidential matter by testing a portion of a population and extrapolating the results to the entire population. It does not exactly define materiality, greatly reduce the amount of substantive testing, or eliminate judgment in testing.

Question 14

In attributes sampling,a 10% change in which of the following factors normally will have the least effect on the size of a statistical sample?

Accepted Answer

The sample size in attributes sampling is primarily determined by the tolerable deviation rate and the expected population deviation rate. Population size may affect the sample size in some cases, but a 10% change in population size would have the least effect on the size of the statistical sample, compared to the other factors mentioned. Therefore, option A is the correct answer. The tolerable deviation rate and expected population deviation rate are the two most important factors in determining the sample size, as they impact the level of risk that can be tolerated in the audit. Standard deviation is not relevant to attributes sampling, as it is a measure of dispersion in a continuous data set, rather than a binary attribute such as pass/fail.

Question 15

As a result of tests of controls,an auditor incorrectly assessed control risk too low and decreased substantive testing.This assessment occurred because the true deviation rate in the population was

Accepted Answer

The true deviation rate in the population being more than the deviation rate in the auditor's sample would lead the auditor to incorrectly assess control risk as too low, as they would not have captured the true extent of deviations in their sample. This underestimation would then lead to a decrease in substantive testing based on the incorrect assumption that controls are more effective than they actually are.

Question 16

In attributes sampling,population size has little or no effect on sample size once the population exceeds approximately

Accepted Answer

In attributes sampling, the effect of population size on sample size diminishes significantly once the population exceeds a certain threshold, which is commonly considered to be around 1,000. Beyond this point, the sample size does not increase proportionally with the population size, making it a practical guideline for auditors and researchers.

Question 17

Which of the following best describes the distinguishing feature of statistical sampling?

Accepted Answer

The key distinguishing feature of statistical sampling is that it provides a means for measuring mathematically the degree of uncertainty that results from examining only part of a population. This allows auditors to draw conclusions about the entire population with a level of confidence and precision, based on the results of examining a sample. The other answer choices are not accurate descriptions of the distinguishing feature of statistical sampling.

Question 18

The computed upper deviation rate is

Accepted Answer

The computed upper deviation rate is the sum of the sample deviation rate and an appropriate allowance for sampling risk. It is used to establish a tolerable deviation rate when testing controls in an audit.

Question 19

Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to

Accepted Answer

Statistical sampling allows auditors to mathematically measure uncertainty and make conclusions about the entire population being tested based on a sample. This is not possible with nonstatistical sampling.

Question 20

Based on a 5% risk of assessing control risk too low,how would an auditor interpret a computed upper deviation rate of 7%?

Accepted Answer

Based on a 5% risk of assessing control risk too low, the auditor is willing to accept a deviation rate of 5% or lower. Since the computed upper deviation rate is 7%, there is a 5% chance that the population deviation rate actually exceeds 7%. Therefore, the auditor cannot rely on the control as it indicates control risk is higher than initially specified.

Quiz 8: Audit Sampling: An Overview and Application to Tests of Controls