Question 1

Statistical sampling used in control testing eliminates the need for evaluation of errors from a qualitative perspective.

Accepted Answer

While statistical sampling can help identify errors in a quantitative fashion, it does not eliminate the need for qualitative evaluation of those errors to determine their nature and impact on the control being tested. Qualitative analysis is still necessary to fully understand the effectiveness of the control and possible areas for improvement.

Question 2

The sample size decreases as the risk of overreliance decreases.

Accepted Answer

The sample size increases as the risk of overreliance decreases because auditors will want more evidence to reduce the risk of incorrectly relying on the controls or data being audited.

Question 3

The individual auditable elements defined by the auditor are the sampling units.

Accepted Answer

The sampling units are the individual items or elements that the auditor selects for testing as part of the audit procedure. These are defined by the auditor based on their understanding of the entity's operations and the risks involved. Therefore, option A is correct.

Question 4

Audit sampling is the application of an audit procedure to less than 100 percent of the items within an account balance or class of transactions for the purpose of evaluating some characteristic.

Accepted Answer

This is an accurate definition of audit sampling.

Question 5

Statistical sampling is used when an auditor chooses to examine all purchases of equipment exceeding $1,000.00 and to test the remaining items by analytical procedures.

Accepted Answer

This statement describes judgmental sampling, which involves selecting items based on the auditor's professional judgment. Statistical sampling involves selecting items based on a mathematical formula to achieve a desired level of confidence in the results.

Question 6

The risk of incorrect acceptance of an account balance as correct,when in fact it is not correct,bears directly on the effectiveness of an audit.

Accepted Answer

If an auditor accepts an account balance as correct when in fact it is not correct, it may lead to material misstatements in the financial statements that may have a material effect on users' decisions. This affects the effectiveness of the audit, as the auditor has failed to detect and report on the material misstatements.

Question 7

The tolerable failure rate is the level at which the control's failure to operate would cause the auditor to conclude that the control is not effective and would likely change the auditor's planned assessment of control risk in performing tests of account balances.

Accepted Answer

The statement accurately describes the tolerable failure rate and its impact on the auditor's assessment of control risk.

Question 8

The auditor must define the population to which sampling relates if the auditor is to use statistical sampling for substantive tests of account balances.

Accepted Answer

Defining the population is a crucial step in statistical sampling as it determines the sample size and helps the auditor to draw valid inferences about the account balance being tested. Without defining the population, it is difficult to ensure that the sample drawn is representative of the entire population and the results of the sample can be projected to the population as a whole. Therefore, it is essential for the auditor to define the population before using statistical sampling for substantive tests of account balances.

Question 9

The tolerable misstatement is the level of misstatement the auditor expects to detect in the population.

Accepted Answer

The tolerable misstatement is the maximum error in the financial statements that the auditor would consider acceptable, not the level of misstatement the auditor expects to detect.

Question 10

For tests of controls,the most commonly used statistical method is attributes sampling.

Accepted Answer

Attributes sampling is the most commonly used statistical method for tests of controls, making the statement true.

Question 11

When testing controls,the use of haphazard selection of a sample allows for random,statistical evaluation.

Accepted Answer

Haphazard selection does not ensure each item in the population has an equal chance of selection, thus it cannot be considered a method for random, statistical evaluation.

Question 12

An attribute is defined as a characteristic of the population of interest to the auditor.

Accepted Answer

An attribute is indeed defined as a characteristic of the population of interest to the auditor.

Question 13

Statistical sampling assists auditors in determining the sufficiency of evidence gathered.

Accepted Answer

Statistical sampling allows auditors to assess whether the evidence gathered is representative of the population being audited, and therefore helps in determining the sufficiency of evidence.

Question 14

Increasing the expected failure rate will cause the sample size to increase.

Accepted Answer

Increasing the expected failure rate will increase the variability in the data, which will increase the sample size needed to obtain accurate results with a desired level of confidence.

Question 15

The expected population deviation rate is the auditor's best estimate of the percentage of transactions processed for which a control is not effectively applied.

Accepted Answer

The expected population deviation rate is indeed the auditor's best estimate of the percentage of transactions processed for which a control is not effectively applied.

Question 16

The most efficient method of testing a large population is the use of nonstatistical sampling.

Accepted Answer

Nonstatistical sampling, also known as judgemental sampling, is a subjective sampling method that relies on the judgement of the auditor. It may not be the most efficient method when testing a large population as it can lead to biased results and may not be representative of the population as a whole. Statistical sampling techniques are generally considered to be more efficient and provide a more accurate representation of the population.

Question 17

Sample size varies directly with sampling risk.

Accepted Answer

Sampling risk decreases as the sample size increases, indicating an inverse relationship between sample size and sampling risk.

Question 18

Audit sampling implies the gathering of evidence to use as a basis for making valid inferences about the characteristics of the population as a whole without examining every transaction.

Accepted Answer

Audit sampling involves choosing a representative sample of the population of transactions and examining them to draw conclusions about the entire population without examining every single transaction. This allows auditors to efficiently test the accuracy and completeness of financial statements while minimizing time and cost.

Question 19

When performing substantive tests using sampling methods,the auditor's main concern is the risk of incorrect rejection.

Accepted Answer

When performing substantive tests using sampling methods, the auditor's main concern is the risk of incorrect acceptance, not incorrect rejection. Incorrect acceptance occurs when the auditor fails to detect a material misstatement in the sample and concludes that the account balance or transaction is fairly stated.

Question 20

The most common statistical approaches for substantive testing are classical variables sampling and MUS.

Accepted Answer

Classical variables sampling and MUS (monetary unit sampling) are two of the most commonly used statistical approaches for substantive testing.

Quiz 8: Specialized Audit Tools: Sampling and Generalized Audit Software