Question 1

Which of the following tasks is not performed by data analytics tools?

Accepted Answer

Data analytics tools are versatile and can perform all the tasks listed, including footing a file, obtaining file statistics, checking for gaps in processing sequences, and preparing custom reports.

Question 2

In testing the reasonableness of an account balance,if MUS sampling cannot be used because of its limitations,what is an alternative statistical method?

Accepted Answer

Classical variables sampling would be the best alternative method to MUS sampling as it would allow for statistical analysis of the account balance based on quantitative variables. Attribute sampling would not be appropriate as it is used for testing qualitative variables and Discovery sampling is not a widely accepted statistical method.

Question 3

Attributes sampling is used in which of the following situations?

Accepted Answer

Attributes sampling is used to test the presence or absence of certain qualities (attributes) in items within a population, such as testing the rates of deviations of controls, rather than for estimating the monetary value of an account balance or the accuracy of account estimates.

Question 4

In selecting a sample for attributes testing,block sampling involves which of the following approaches?

Accepted Answer

Block sampling involves selecting all items in a specific time frame, such as a day or week, rather than selecting items randomly or at regular intervals.

Question 5

When an auditor uses MUS and analyzes misstatements in the lower stratum,which of the following will be multiplied by the sampling interval to calculate the projected misstatement for each misstated item?

Accepted Answer

The tainting percentage is used in Monetary Unit Sampling (MUS) to calculate the projected misstatement for each misstated item in the lower stratum. It is calculated by dividing the difference between the audited (correct) value and the book value by the book value of the sampled item, then multiplied by the sampling interval to project the misstatement.

Question 6

MUS sampling has all of the following advantages over other statistical methods except which of the following?

Accepted Answer

Monetary Unit Sampling (MUS) is primarily designed to focus on larger value items, as it selects items for testing based on their monetary value. This means it inherently targets items that are more likely to have errors of significance to the audit. However, because it is value-weighted, MUS does not inherently ensure that negative balances or zero balances are included in the sample. Including such items often requires specific additional procedures or adjustments to the sampling approach.

Question 7

When evaluating the MUS sample results,the auditor calculates the total estimated misstatement in the account balance based on the sampling process using which of the following components?

Accepted Answer

All of the components listed (basic precision, projected misstatement for items in lower-stratum, and incremental allowance for sampling error) are used to calculate the total estimated misstatement in the account balance when using MUS sampling. Basic precision is used to calculate the sampling interval, projected misstatement for items in lower-stratum is used to estimate the misstatement in the unsampled population, and incremental allowance for sampling error is used to account for the possibility of errors in the sample selection process.

Question 8

Which one of the following is a proper course of action for the auditor when the total estimated misstatement exceeds the tolerable misstatement?

Accepted Answer

When the total estimated misstatement exceeds the tolerable misstatement, the auditor should take multiple actions. First, the auditor should ask the client to correct the known misstatements. Second, the auditor should analyze the detected misstatements for common problems, which may help identify additional misstatements that can be corrected. Finally, one option is to expand the sample to obtain more reliable results, which can help reduce the likelihood of material misstatements going undetected. Therefore, all of the options mentioned in the question should be considered by the auditor.

Question 9

Which of the following is a factor of nonsampling risk?

Accepted Answer

Nonsampling risk refers to the risk that arises from factors other than sampling, such as the auditor's failure to carry out appropriate audit procedures. Choices B, C, and D are related to sampling risk, which is a different type of risk.

Question 10

In attributes sampling,the risk of incorrect rejection deals with which of the following?

Accepted Answer

The risk of incorrect rejection (also known as Type I error) in attributes sampling primarily deals with efficiency. It occurs when an auditor incorrectly rejects a population as being materially misstated when it is not. This can lead to unnecessary additional work, thus affecting the efficiency of the audit process.

Question 11

In MUS,what is meant by a sampling interval of 900?

Accepted Answer

A sampling interval of 900 in Monetary Unit Sampling (MUS) means that every 900th dollar in the population is selected for testing.

Question 12

In selecting a sample for attributes testing,systematic selection involves which of the following approaches?

Accepted Answer

Systematic selection involves selecting every nth item after a random start. This ensures that each item has an equal chance of being selected, while also avoiding bias in the selection process. The other options do not provide an equal chance of selection and/or may introduce bias.

Question 13

Which of the following are limitations of using the MUS sampling method?

Accepted Answer

All of the given options are limitations of the MUS sampling method. MUS is suitable for testing overstatement but not very suitable for understatement. It is also not very effective in testing for zero and negative amounts. Additionally, if the auditor expects numerous misstatements in the population, then MUS may not be the best sampling method to use.

Question 14

In selecting a sample for attributes testing,haphazard selection involves which of the following approaches?

Accepted Answer

Haphazard selection involves selecting items in an arbitrary manner without any conscious bias. Option A refers to simple random sampling where every item has an equal chance of selection. Option B refers to systematic sampling where items are selected at regular intervals after a random start. Option D refers to convenience sampling where items are selected based on their accessibility or availability.

Question 15

In using MUS,once the auditor has determined the sample size,which of the following is needed to determine the sampling interval?

Accepted Answer

The sampling interval is determined by dividing the population size by the sample size. Therefore, population size is needed to determine the sampling interval. Expected misstatement, tolerable misstatement, and mean are used in determining the acceptable level of risk and in evaluating the results of the sample, but they are not directly used in determining the sampling interval.

Question 16

Which of the following is not a type of statistical method that provides results in dollar terms?

Accepted Answer

Attributes sampling and Probability proportional to size (PPS) sampling do not provide results in dollar terms. Variables sampling and Monetary unit sampling both provide results in dollar terms.

Question 17

Which of the following is a disadvantage of MUS sampling?

Accepted Answer

MUS (Monetary Unit Sampling) sampling is designed to test for overstatement but not for understatement, which is a disadvantage. Option A is incorrect because sample selection in MUS sampling requires careful planning and calculation. Option B is incorrect because sample size in MUS sampling is relatively larger than that of other sampling methods. Option D is incorrect because MUS sampling indirectly controls the risk of incorrect acceptance by adjusting the sample size and the number of misstatements.

Question 18

Sampling risk deals with which of the following?

Accepted Answer

Sampling risk deals with the risk that an incorrect conclusion or inference is drawn from the sample results. It doesn't involve inappropriate diagnosis of client's problems or not carrying out the appropriate audit procedure, although those may be related risks in the audit process.

Question 19

The auditor will do which of the following when the results of sample testing conclude that there is misstatement in excess of the tolerable misstatement?

Accepted Answer

When sample testing indicates a misstatement exceeding the tolerable misstatement, the auditor will propose adjustments to the client. This is done to correct the misstatement and ensure that the financial statements are not materially misstated. The auditor will also need to evaluate the effect on other areas of the financial statements impacted by the misstatement and consider if any further testing or adjustments are necessary. The auditor may need to issue a qualified or adverse opinion if the misstatement is deemed material and cannot be corrected through adjustments. A disclaimer of opinion may be necessary if the auditor is unable to obtain sufficient evidence to form an opinion on the financial statements. Throwing out the sample or disclosing the misstatement in the financial statements are not appropriate actions for the auditor to take in this situation.

Question 20

In attributes sampling,which of the following does the risk of incorrect acceptance deal with?

Accepted Answer

The risk of incorrect acceptance in attributes sampling deals with the effectiveness of the audit. It refers to the risk that the auditor concludes that a control is effective when, in fact, it is not, potentially leading to an incorrect audit opinion.

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