18.

As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses

control risk lower than appropriate. The most likely explanation for this situation is that
a. The deviation rates of both the auditor's sample and the population exceed the tolerable
rate.
b. The deviation rates of both the auditor's sample and the population are less than the
tolerable rate.
C. 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.
d. The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate
in the population is le an the erable rate.

19. The likelihood of assessing control risk too low is the risk that the sample selected to test
controls
a. Does not support the tolerable misstatement for some or all of management's assertions.
b. Does support the auditor's planned assessed level of control risk when the true operating
effectiveness of the control does not justify such an assessment.
G. Contains misstatements that could be material to the financial statements when aggregated
with misstatements in other account balances.
d. Contains proportionately more deviations from prescribed internal control policies or
procedures than exist in the population.
20. The likelihood of assessing control risk too high is the risk that the sample selected to test
controls
a. Does not support the auditor's planned assessed level of control risk when the true
operating effectiveness of the control justifies such an assessment.
b. Contains misstatements that could be material to the financial statements when aggregated
with misstatements in other account balances or transaction classes.
C. Contains proportionately fewer monetary errors or deviations from prescribed internal
control policies or procedures than exist in the balance or class as a whole.
d. Does not support the tolerable misstaternent for some or all of management's assertions.
21. The
The tolerable rate of deviations for a test of controls is generally
a. Lower than the expected rate of errors in t related accounting population.
b. Higher than the expected rate of errors in the related accounting records.
C. ldentical to the expected rate of errors in the related accounting records.
d. Unrelated to the expected rate of errors in the related accounting records.

22. If a selected random number matches the number of a voided voucher, the voucher ordinarily
should be replaced by another voucher in the sample if the voucher
a. Constitutes a deviation C. Cannot be located
b. Has been property voided d. Represents an immaterial peso amount
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23. Assessing control risk too high is the risk that the sample
a. Does not support tolerable error for some or all of management's assertions.
b. Contains proportionately more deviations from prescribed control procedures than actually
exist in the population as a whole.
C. Contains monetary misstatements that could be material to the financial statements when
aggregated with misstatements in other account balances or classes of transactions.
d. Contains proportionately fewer iations from prescribed control procedures than actually
exist in the population as a whole.

24. When using statistical sampling for tests of controls, an auditor's evaluation would include a
statistical conclusion about whether:
a. Deviations in the population are within an acceptable range.
b. Monetary precision exceeds a predetermined amount.
C. The population's total monetary value is not in error by more than a predetermined amount.
d. Population characteristics occur at least once in the population.

25. An auditor, planning an attribute sample from a large number of invoices, intends to estimate
the actual rate of deviations. Which factor below is the most important for the auditor to
consider?
a. Audit objective C. Population size
b. Desired confidence level d. Popula tion variance
Variables Sampling
1 "Whenever a sample is taken, there is a risk that the quantitative conclusions about the
population will be incorrect."
a. This is always true.
b. This is always true unless 100 percent of the population is tested.
c. This is true for statistical sampling, but not for non-statistical sampling.
d. This is true for non-statistical sampling but not for statistical sampling.
2. Which of the folowing Sam
sampling methods is used to estimate a numerical measurement of a
population,such as a
s
a. Attribute sampling.
value?
C. Variables sampling.
b. Stop-or-go sampling. d. Random-number samnpling.

3. In applying variables sampling, an auditor attempts to

Cotimto o aitotho borootoricio ofintoroet
 b. Stop-or-go sampling. d. Random-number sampling.

3. In applying variables s charctorietie

aualitate an auditor attempts to
a. ea ic of interest.
b. Determine various rates of occurrence for specified attributes.
C. Discover at least one instance of a critical deviation.
d. Predict a monetary population value within a range of precision.

4. Several risks are inherent in the evaluation of audit evidence that has been obtained through
the use of statistical sampling. An example of a beta or Type Il eror related to sampling risk is
the failure to
a. Properly define the population to be sampled.
b. Drawa random sample from the population.
C. Reject the statistical hypothesis that a book value is not materially misstated when the true
book value is materially misstated.
d. Accept the statistical hypothesis that the book val ue is not materially misstated when the
true book value is not materially misstated.

5. As lower acceptable levels of both audit risk and materiality are established, the auditor should
plan more work on individual accounts to
a. Find smaller misstatements. C. Increase the tolerable misstatement in the accounts.
b. Find larger misstatements. d. Decrease the risk of assessing control risk too low.
6. In performing substantive tests, the auditor is concerned with two risks or errors of sampling:
1. The risk of incorrect rejection (an alpha or Type I error)
2. The risk of incorrect acceptance (a beta or Type ll error)
Which of the following is true about alpha and beta errors?
a. The alpha error is of greater concern to the auditor than the beta error.
b. The beta error is of greater concern to the auditor than the alpha error.

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C. The beta error and the alpha error are of to the auditor.
equ
d. Neither the alpha error nor the beta error need be iderod hy the auditor.
7. While performing a substantive test of details during an audit, the auditor determined that the
sample results supported the conclusion that the recorded account balance was materially
misstated. It was, in fact, not materialy misstated. This situation illustrates the risk of
a. Assessing control risk too low. C. Incorrect rejection.
b. Assessing control risk too high. d. Incorrect acceptance.
8. Conducting a substantive test of an account balance, an auditor hypothesis that no material
misstatement exists. The risk that sample results will support the hypothesis when a material
misstatement actually does exist is the risk of
retrejection.
a. Incorrect C. Incorect acceptance.
b. Alpha error. d. Type lerror.
9. The risk of incorrect acceptance and the risk of assessing control risk too low relate to the
a. Preliminary estimates of materiality levels c. Eficiency of the audit
b. Allowable risk of tolerable error d. Effectiveness of the audit

When would difference estimation or ratio estimation sampling methods be inappropriate?

a. If differences between the book values and audit values of a population are rare.
b. If the average difference between the audit value and book value of a population is small.
C. If differences between the book value and audit value of a population are numerous.
d. If the average difference between the audit value and book value of a population is large.
11.Which of the following most likely would be an advantage in using classical variables sampling
rather than probability-proportional-to-size (PPS) sampling.
a. An estimate of the standard deviation of the population's recorded amounts is not required.
b. The auditor rarely needs the assistance of a computer program to design an efficient
sample.
C. Inclusion of zero and negative balances generally does not require special design
considerations
d. Any amount that is individually significant is automatically identified and selected.

12. An auditor is preparing to sample accounts receivable for overstatement. Astatistical sampling
method that automaticaly provides stratification when using systematic selection is
a. Attribute sampling. C. Probability proportionate to size sampling
b. Ratio-estimation sampling. d. Mean-per-unit (MPU) sampling.
13. An auditor wishes to sample 200 sales receipts from a population of 5,000 receipts issued
during the last year. The receipts have preprinted serial numbers and are arranged in
chronological (and thus serial number) order. The auditor randomly chooses a receipt from the
first 25 receipts and then selects every 25h receipt thereafter. The sampling procedure
described here is called
a. Systematic random sampling. C. Judgment interval sampling.
b. Monetary-unit sampling. d. Variables sampling.
14. Which of the following sample planning factors would influence the sample size for a
substantive test of details for a specfic account?
Expected amount of misstatements Measure of tolerable misstatement
No No
b Yes Yes
C. No Yes
d. Yes No

15. Which of the following courses of action would an auditor most likely folow in planning a
sample of cash disbursements if the auditor is aware of several unusually large cash
disbursements?
a. Set the tolerable rate deviation at a lower level than originaly 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.

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16. In statistical sampling methods used in substantive testing, when would an auditor most likely
stratify a population into meaningful groups?
If the population has highly variable recorded amounts.
If probability proportional to size sampling is used.
C. If the auditor's estimated toleratble misstatement is extremely small.
d. If the standard deviation of recorded amounts is relatively small.
17. How would increases in tolerable misstatement and assessed level of control risk affect the
sample size in a substantive test of details?
Increase in tolerable Increased in assessed level of
misstatement Control risk
a. Increase sample size Increase sample size
Increase sample size Decrease sample size
Decrease sample size Increase sample size
Decrease sample size Decrease sample size

18. Using statistical sampling to assist in verifying the year-end accounts payable balance, an
auditor has accumulated the following data:
Number of Book Balance Determined by
Accounts Balance the Auditor
Population 4,100 P5.000,000 ?
Sample 200 P 250,000 P300,000

Using the ratio estimation technique, the auditor's estimate of year-end accounts payable
balance is
a. P6,150,000 b. P6,000,000 c. P5,125,000 d. P5,050,000

19. An auditor is applying a difference estimation sampling plan. Recorded book value is
P1,000,000 and the auditor estimates a P75,000 understatement difference. In this case, the
auditor's estimated population value is
P925.000 b. P1.075.000 C. P1,000,000 d. P1,025,000

20. An auditor is applying mean-per-unit estimation. Assuming estimated audited value is

P950,000, the achieved allowance for sampling risk is P75,000, and recorded book value is
P925,000, what is the auditor's conclusion?
a. Recorded book value is not likely misstated by a material amount.
b. Recorded book value is misstated by a material amount.
. Recorded book value is not likely misstated by a material amount, assuming the client
records an adjusting journal entry equal to the allowance for sampling risk.
d. There is insufficient evidence to reach a conclusion.

21. In a probability-proportiona-to-size sample interval of P10,000, an auditor discovered that a

selected account le with a recorded amount of P5,000 had an audit amount P2,000.
The projected error of this sample is
a. P3.000 b. P4,000 c. P6,000 d. P8,000

22. An auditor is evaluating the results of a variables sampling plan. Which of the following is not
relevant to the auditor's judgment about the sample?
a. Management's explanations for why errors in the sample occurred.
b. Projecting the sample error to the population.
c. Considering the effects of sampling risk.
d. Qualitative information that lends insight into errors found.

23. When using classical variables sampling for estimation, an auditor normaly evaluates the
sampling results by calculating the possible error in either direction. This statistical concept is
known as
a. Precision. C. Projected error.
b. Reliability. d. Standard deviation.

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