Audit Sampling PSA 530 (Test of Controls) 9. The process of dividing a population into subpopulations, each of which is a group of sampling units which have similar characteristics (often monetary value) is A. Division B. Stratification C. Grouping D. Characterization
32.. Which of the following combinations results in a decrease in sample size in a sample for attributes? Risk of assessing Tolerable rate Expected population control risk too low deviation rate A. Increase Decrease Increase B. Decrease Increase Decrease C. Increase Increase Decrease D. Increase Increase Increase
39 of the following constitutes audit sampling? a. Selecting and examining specific items to determine whether or not a particular procedure is being performed. b. Examining items to obtain information about matters such as the client's business, the nature of transactions, accounting and internal control systems. c. Examining items whose values exceed a certain amount so as to verify a large proportion of the total amount of an account balance or class of transactions. d. Applying audit procedures to less than 100% of items within an account balance or class of transactions such that all sampling units have a chance of selection.
a. Nonstatistical sampling b. Attribute estimation sampling c. Discovery sampling d. Stratified random sampling
d. Choose another check to replace the missing check in the sample.
a. The auditor studies the business and industry and applies analytical procedures as a basis for assessing inherent risk. b. When control risk and inherent risk are high, the auditor increases detection risk to maintain overall audit risk at the desired level. c. The auditor studies and evaluates internal control policies and procedures for assessing control risk. d. The auditor designs substantive audit procedures to reduce detection risk to an acceptable level.
b. Nonstatistical sampling has greater applicability to large populations than does statistical sampling. c. Nonstatistical sampling is more subjective, but produces greater consistency in the application of audit judgment. d. Nonstatistical sampling has greater applicability to populations that lend themselves to random selection.
b. Does not allow sampling risk to be objectively measured. c. Frequently results in samples that are not representative of the population. d. Gives less accurate point estimates of parameters than statistical sampling. 10 8. B 31. An auditor is testing credit authorization procedures by examining sales invoices for credit approval by the credit department. The procedures will be considered to be working adequately if 96% of all sales invoices either indicate approval or are cash sales. The auditor selects a random sample of 100 invoices. In this situation, which of the following outcomes illustrates underassessment? a. The auditor finds five deviations and concludes that procedures work inadequately. The actual population deviation rate is 2%. b. The auditor finds no deviations and concludes that procedures work adequately. The true population deviation rate is 5%. c. The auditor finds no deviations and concludes that the procedures work adequately. The true population deviation rate is 2%. d. The auditor finds five deviations and concludes that procedures work inadequately. The true population deviation rate is 6%.
b. Variable sampling. c. Discovery sampling. d. Attribute sampling.
11 8. An auditor who uses statistical sampling for attributes in testing internal controls should increase the assessed level of control risk when the a. Sample occurrence rate is less than the expected occurrence rate used in planning the sample. b. Tolerable rate less the allowance for sampling risk exceeds the sample occurrence rate. c. Sample occurrence rate plus the allowance for sampling risk exceeds the tolerable rate. d. Sample occurrence rate plus the allowance for sampling risk equals the tolerable rate.
B. Risk of assessing control risk too low. C. Number of deviations in the population. D. Number of deviations found in the sample. 134. When the auditors have decided to use statistical rather than nonstatistical sampling, a disadvantage is that: A. Designing efficient samples is more difficult. B. The costs of training staff may be higher. C. Sampling without replacement must be used. D. Objectively evaluating results is impossible.
D. The risk of incorrect rejection.
What is standard deviation in audit sampling?Standard deviation – can be thought of the “average” distance between each data point in a population. The equation for standard deviation (also called sigma – σ) is σ = SQRT{Σ(xn– xbar)2/(n-1)} where “n” is the number of samples chosen.
Which of the following best describes what the auditor means by the expected rate of deviation in an attributes sampling plan?Which of the following best describes what the auditor means by the expected rate of deviation in an attributes sampling plan? The degree of confidence that the sample is representative of the population.
What are the considerations observed by auditors in determining audit sample size?40. In determining the sample size, the auditor should consider whether sampling risk is reduced to an acceptably low level. Sample size is affected by the level of sampling risk that the auditor is willing to accept. The lower the risk the auditor is willing to accept, the greater the sample size will need to be.
What describes tainting percentage?In a misstated amount, tainting is the percentage of the book value that the misstatement represents. After performing your substantive procedures on sampled data you can sum all the individual tainting percentages from any misstated amounts.
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