QUIZZER 8
1. A sample in which every possible combination of items in the population has an equal chance of
constituting the sample is a
a. representative sample.
b. statistical sample.
c. random sample.
d. judgment sample.
2. The process which requires the calculation of an interval and then selects the items based on the
size of the interval is
a. statistical sampling.
b. random selection.
c. systematic selection.
d. computerized selection.
3. If an auditor, without statistical sampling, selects a sample of one hundred items from a population
and finds two exceptions, the auditor
a. can conclude that the sample deviation rate is 2 percent.
b. can conclude that the population deviation rate is 2 percent.
c. can conclude the highest deviation rate expected in the population.
d. cannot make any conclusions about either the sample or the population
4. The risk which the auditor is willing to take of accepting a control as being effective when it is not, is
the
a. tolerable deviation rate.
b. acceptable risk of over-reliance.
c. estimated population deviation rate.
d. finite correction factor.
5. Which of the following statements regarding the process of defining the population is not correct?
a. The population represents the body of data about which the auditor wishes to generalize.
b. The auditor can define the population to include whatever data is desired.
c. The auditor can randomly sample from whatever part of the population that he/she chooses.
d. The auditor may generalize only about that population which has been sampled.
6. The initial sample size is so called because
a. the auditor must take several samples to ensure randomness.
b. the auditor must take several samples to ensure that the final sample is representative of the
population.
c. the deviations must be evaluated before deciding whether the sample is sufficiently large to achieve
the objectives.
d. there is always another sample to be done.
7. The sample deviation rate equals
a. the number of deviations in the population divided by the sample size.
b. the number of items in the population multiplied by the number of deviations in the sample.
c. the number of deviations in the sample divided by the sample size.
d. the number of deviations in the population divided by the population size.
8. To determine whether the internal control structure operated effectively to minimize errors of
failure to invoice a shipment, the auditor would select a sample of transactions from the population
represented by the
a. customer order file.
b. bill of lading file.
c. open invoice file.
d. sales invoice file.
9. When auditors sample for tests of details of balances, the objective is to determine whether the
account balance
a. is correct.
b. contains material errors.
c. is fairly stated.
d. is material in comparison to operating income.
10. PSA 500 states that the auditor may decide to select specific items from a population based on such
factors as the auditor's understanding of the entity, the assessed risk of material misstatement, and the
characteristics of the population being tested. Specific items that may be selected for testing usually
include the following, except
a. Items that are of high value.
b. Items that are suspicious, unusual, risk-prone, or have a history of error.
c. All items whose values do not exceed a certain amount so as to verify only a small proportion of the
total amount of class of transactions or account balance.
d. Items that provide information about matters such as the nature of the entity, the nature of
transactions, and internal control.
11. Population, as defined in PSA 530 (Audit Sampling), means the entire set of data from which a
sample is selected and about which the auditor wishes to draw conclusions. It is important for the
auditor to ensure that the population is
I. Appropriate to the objective of the audit procedure.
II. Complete.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
12. The likelihood of assessing control risk too high is the risk that the sample selected to test controls
a. Does not support the tolerable error for some or all of management's assertions.
b. Contains proportionately fewer deviations from prescribed internal controls than exist in the balance
or class as a whole.
c. Does not support the auditor's planned assessed level of control risk when the true operating
effectiveness of internal control justifies a lower assessment.
d. Contains misstatements that could be material to the financial statements when aggregated with
misstatements in other account balances or transactions classes.
13. The following are examples of nonsampling risk, except
a. Failure to recognize an error.
b. Obtaining an unrepresentative sample.
c. Use of an audit procedure inappropriate to achieve a given objective.
d. Failing to evaluate results properly.
14. In attribute sampling, a 5% change in which of the following factors normally will have the least
effect on the size of a statistical sample?
a. Expected deviation rate.
b. Risk of assessing control risk too low.
c. Population size.
d. Tolerable deviation rate.
15. In determining the number of items to be selected in a sample for a particular substantive test of
details, the auditor should consider all of the following, except
a. Tolerable misstatement
b. Characteristics of the population
c. Deviation rate
d. Allowable risk of incorrect acceptance
16. For which of the following audit tests would an auditor most likely use attribute sampling?
a. Selecting accounts receivable for confirmation of account balances.
b. Examining invoices in support of the valuation of property, plant, and equipment additions.
c. Making an independent estimate of the amount of FIFO inventory.
d. Inspecting employee time cards for proper approval by supervisors.
17. Which of the following sampling methods would be used to estimate a numerical measurement of a
population, such as a peso value?
a. Variable sampling
b. Attribute sampling
c. Random-number sampling
d. Stop-or-go sampling
18. Which of the following combinations results in a decrease in sample size in an attribute sample?
Allowable Risk
of Assessing
Control Risk Tolerable Expected Population
Too Low Deviation Rate Deviation Rate
a. Increase Increase Increase
b. Decrease Increase Decrease
c. Increase Increase Decrease
d. Increase Decrease Increase
19. In planning a statistical sample for a test of controls, an auditor increased the expected population
deviation rate (EDR) from the prior year's rate because of the results of the prior year's tests of controls
and the overall control environment. The auditor most likely would then increase the planned
a. Risk of assessing control risk too low.
b. Sample size.
c. Allowance for sampling risk.
d. Tolerable deviation rate.
20. As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses
control risk lower than appropriate. Which of the following is the most likely explanation for this
situation?'
a. The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate in the
population is less than the tolerable rate.
b. The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the
population exceeds the tolerable rate.
c. The deviation rates of both the auditor's sample and the population are less than the tolerable rate.
d. The deviation rates of both the auditor's sample and the population exceed the tolerable rate.
21. Audit sampling for substantive tests is appropriate when
a. analytical procedures are used
b. the population contains small but large value items
c. the auditor wants to eliminate sampling risk
d. tests of details are performed
22. Sampling risk that leads the auditor to conclude that controls are more effective than they actually is
a. Risk of assessing control risk too low
b. Risk of incorrect rejection
c. Risk of assessing control risk too high
d. Risk of incorrect acceptance
23. Of the four erroneous conclusions from a sampling risk, the auditor is primarily concerned with
a. Risk of assessing control risk too low
b. Risk of incorrect rejection
c. Risk of assessing control risk too high
d. Risk of incorrect acceptance
24. 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. Grouping
c. Stratification
d. Characterization
25. If the audit procedure is not applicable to the selected item, as when for example, a voided check is
selected while testing for evidence of payment authorization, which of the following is incorrect?
a. The auditor shall treat the item as a deviation.
b. The auditor shall perform the audit procedure on a replacement item.
c. If the auditor is satisfied that the voiding of the check is proper, such an item does not constitute
deviation.
d. The replacement item, as the case may be, must be chosen by the auditor.
26. Which of the following courses of action would an auditor most likely follow in planning a sample of
cash disbursements if the auditor is aware of several unusually large cash disbursements?
a. Set the tolerable rate of deviation at a lower level than originally planned.
b. Stratify the cash disbursements population so that the unusually large disbursements are selected.
c. Increase the sample size to reduce the effect of the unusually large disbursements.
d. Continue to draw new samples until all the unusually large disbursements appear in the sample.
27. When an auditor goes through a population and selects items for the sample without regard to their
size, source, or other distinguishing characteristics, it is called
a. Block selection
b. Haphazard selection
c. Systematic selection
d. Statistical selection
28. A number of factors influence the sample size for a substantive test of details of an account balance.
All other factors being equal, which of the following would lead to larger sample size?
a. Greater reliance on internal control
b. Higher acceptable sampling risk
c. Smaller reliance on analytical procedures
d. Smaller measures of tolerable misstatement
29. Which statement is incorrect about sampling risk?
a. Sampling risk arises from the possibility that the auditor's conclusion was based on a sample which
may be different from the conclusion reached if the entire population were subjected to the same audit
procedure.
b. The risk of assessing control risk too low and the risk of incorrect acceptance affect audit effectiveness
as it would usually lead to additional work to establish that initial conclusions were incorrect.
c. Beta risk is more acceptable than Alpha risk when it comes to sampling risk.
d. The risk of assessing control risk too high is the risk that the auditor will conclude, in the case of a test
of controls, that control risk is higher than it actually is.
30. Which of the following statements is correct?
a. The expected population deviation rate has little or no effect on sample size.
b. For a given tolerable rate, a larger sample size should be selected as the expected population
deviation rate decreases.
c. The population size has little or no effect on sample size except for very small populations.
d. As the population size doubles, the sample size should also double.
31. An advantage of statistical over non-statistical sampling methods in tests of controls is that the
statistical methods
a. Afford greater assurance than a non-statistical sample of equal size.
b. Provide an objective basis for quantitatively evaluating sampling risks.
c. Can more easily convert the sample into a dual-purpose test useful for substantive testing.
d. Eliminate the need to use judgment in determining appropriate sample sizes.
32. As the acceptable level of detection risk decreases the auditor may
a. Perform test of controls at year end rather than at interim
b. Increase the level of inherent and control risk
c. Design more effective substantive procedures
d. Use larger sample size for tests of controls
33. The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the risk
that
a. Tests of controls may fail to identify controls relevant to assertions.
b. Material misstatements may exist in the financial statements.
c. Specified controls requiring segregation of duties may be circumvented by collusion.
d. Entity policies may be overridden by senior management.
34. The relationship between sample size and the allowable sampling risk is
a. Direct
b. Variable
c. Inverse
d. Indeterminate
35. If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of
incorrect acceptance:
a. is reduced
b. is increased
c. is not changed
d. may be reduced or increased depending upon other circumstances.
