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Просмотров: 17619 стр.2. As to Industrial Partner
a. Division of Profit
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall receive a just and equitable share of the profits.
b. Division of Loss
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall have no share in the losses.

Jun 25, 2015

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2. As to Industrial Partner
a. Division of Profit
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall receive a just and equitable share of the profits.
b. Division of Loss
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall have no share in the losses.

© All Rights Reserved

Просмотров: 176

2. As to Industrial Partner
a. Division of Profit
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall receive a just and equitable share of the profits.
b. Division of Loss
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall have no share in the losses.

© All Rights Reserved

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Procedures

MULTIPLE CHOICE

1.

sampling may do so because statistical sampling helps the

auditor

a.

Measure the sufficiency of the evidential matter

obtained.

b.

Eliminate subjectivity in the evaluation of sampling

results.

c.

Reduce the level of tolerable error to a relatively low

amount.

d.

Minimize the failure to detect a material misstatement

due to non-sampling risk.

ANSWER:

2.

changing the measure of tolerable error to a smaller value

would cause the sample size to be:

a.

Smaller.

b.

Larger.

c.

Unchanged.

d.

Indeterminate.

ANSWER:

3.

estimate a numerical measurement of a population, such as a

dollar value?

a.

Numerical sampling.

b.

Discovery sampling.

c.

Sampling for attributes.

d.

Sampling for variables.

ANSWER:

4.

plus or minus two percent, of a firm's invoices contain

errors. The plus or minus two percent is known as the

estimate's:

a.

Precision.

b.

Accuracy.

143

c.

d.

5.

Confidence level.

Standard error.

ANSWER: A

In order to quantify the risk that sample evidence leads to

erroneous conclusions about the sampled population

a.

Each item in the sampled population must have an equal

chance of being selected.

b.

Each item in the sampled population must have a chance

of being selected proportional to its book value.

c.

Each item in the sampled population must have an equal

or known probability of being selected.

d.

The precise number of items in the population must be

known.

ANSWER:

6.

audit risk assessment?

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.

ANSWER:

7.

need to consider in planning a particular audit sample

for a

control test?

a.

Number of items in the population.

b.

Total dollar amount of the items to be sampled.

c.

Estimated standard deviation of the population.

d.

Tolerable error.

ANSWER:

8.

item in the population:

a.

Can be assigned to a specific stratum.

b.

Is independent of outside influence.

c.

Can be identified with a unique number.

d.

deviations of the population mean.

ANSWER:

9.

errors of $5 or more. Upon finding one such error, these

records are scheduled for a complete review. This

conclusion is most likely based on a

a.

Cluster sample.

b.

Discovery sample.

c.

Systematic sample.

d.

Stratified sample.

ANSWER:

12.

that statistical sampling:

a.

Enables auditors to objectively measure the reliability

of their sample results.

b.

Permits use of a smaller sample size than would be

necessary with non-statistical sampling.

c.

Is compatible with a wider variety of sample selection

methods than is non-statistical sampling.

d.

Allows auditors to inject their subjective judgment in

determining sample size and selection process in order

to audit items of greatest value and highest risk.

ANSWER:

11.

generally

a.

Lower than the expected occurrence rate in the related

accounting records.

b.

Higher than the expected occurrence rate in the related

accounting records.

c.

Identical to the expected occurrence rate in the

related accounting records.

d.

Unrelated to the expected occurrence rate in the

related accounting records.

ANSWER:

10.

144

statistical sampling from nonstatistical sampling?

145

a.

b.

c.

d.

inference, whereas nonstatistical sampling is a more

subjective approach.

Nonstatistical sampling has greater applicability to

large populations than does statistical sampling.

Nonstatistical sampling is more subjective, but

produces greater consistency in the application of

audit judgment.

Nonstatistical sampling has greater applicability to

populations that lend themselves to random selection.

ANSWER:

13.

a sample using systematic selection with a random start.

The primary advantage of such a systematic selection is that

population items

a.

Which include errors will not be overlooked when the

auditor exercises compatible reciprocal

options.

b.

May occur in a systematic pattern, thus making the

sample more representative.

c.

May occur more than once in a sample.

d.

Do not have to be prenumbered in order for the auditor

to use the technique.

ANSWER:

14.

difference between the expected occurrence rate and the

tolerable occurrence rate is the planned

a.

Precision.

b.

Reliability.

c.

Dispersion.

d.

Skewness.

ANSWER:

15.

a.

Selection of a random sample probably is not possible.

b.

Systematic sampling may be appropriate.

c.

Stratified sampling should be used.

d.

Random number tables cannot be used.

ANSWER:

16.

constant, sample size will increase as which of the

following becomes smaller?

a.

Reliability level.

b.

Population.

c.

Planned precision.

d.

Expected rate of occurrence.

ANSWER:

17.

a.

Choosing an audit procedure that is inconsistent with

the audit objective.

b.

Choosing a sample size that is too small to achieve the

sampling objective.

c.

Failing to detect an error on a document that has been

inspected by the auditor.

d.

Failing to perform audit procedures that are required

by the sampling plan.

ANSWER:

20.

assist the auditor in several ways. Which of the following

tasks is not enhanced by sampling?

a.

Determining the number of documents to examine in

testing for a specific attribute.

b.

Selecting the documents to be tested.

c.

Examining the documents.

d.

Evaluating the sample results.

ANSWER:

19.

auditors when testing for internal control effectiveness?

a.

Stratified random sampling.

b.

Attribute sampling.

c.

Variables sampling.

d.

Unrestricted random sampling with replacement.

ANSWER:

18.

146

to an auditor performing control tests?

a.

Do selling prices agree with published price lists?

b.

Do purchased parts meet established quality standards?

c.

Are proper labor rates being used to compute payroll?

147

d.

ANSWER:

21.

justify lowering the assessed control risk level

depends

primarily on which of the following?

a.

The cause of the errors.

b.

The materiality of the attribute(s) to be tested.

c.

The amount of any substantive errors.

d.

The limit used in audits of similar clients.

ANSWER:

22.

true?

a.

An increase in the tolerable occurrence rate, other

factors remaining unchanged, increases sample size.

b.

The higher the expected occurrence rate, other factors

remaining unchanged, the larger will be the sample

size.

c.

The more critical the attribute being tested, the

higher will be the tolerable occurrence rate set by the

auditor, and the larger will be the sample size.

d.

The lower the acceptable risk of underassessment of

control risk, the smaller will be the sample size.

ANSWER:

23.

Company, the auditor determines that in performing a

test of

internal control effectiveness, the rate of error in

the

sample does not support the auditor's preconceived

notion of

a tolerable occurrence rate when, in fact, the

actual error

rate in the population does meet the auditor's

notion of

effectiveness. This situation illustrates

the risk of

a.

Underassessment of control risk.

b.

Overassessment of control risk.

c.

Incorrect rejection.

d.

Incorrect acceptance.

ANSWER:

24.

changing the risk of underassessment from five percent to

148

a.

Smaller.

b.

Larger.

c.

Unchanged.

d.

Indeterminate.

ANSWER:

25.

merchandise for which the client was billed was

received.

The population for this test consists of all

a.

Merchandise received.

b.

Vendors' invoices.

c.

Canceled checks.

d.

Receiving reports.

ANSWER:

26.

replace audit judgment. In utilizing statistical sampling

techniques, the auditor must apply judgment in all but which

of the following tasks?

a.

Selecting a tolerable rate of error.

b.

Determining an acceptable risk of underassessing

control risk.

c.

Calculating the actual error rate.

d.

Assessing the materiality of control weaknesses.

ANSWER:

27.

application, what must be specified?

a.

Population mean, expected error rate, precision.

b.

Precision, reliability, standard deviation.

c.

Precision, reliability, expected occurrence rate.

d.

Population mean, standard deviation, precision.

ANSWER:

28.

sampling in auditing is true?

a.

Inasmuch as audits are test-based, generally accepted

auditing standards require the use of statistical

sampling methods whenever the auditor decides to

examine only part of a population.

b.

Although statistical sampling may be applied to control

testing, it is required for substantive testing

149

c.

d.

purposes.

Sampling methods are used by auditors in both control

testing and substantive testing.

Statistical sampling methods are more appropriate for

control testing when the auditor elects to reprocess

transactions, than when controls are tested by means of

document examination.

ANSWER:

29.

related to which of the following generally accepted

auditing standards?

a.

The work is to be adequately planned and assistants, if

any, are to be properly supervised.

b.

In all matters relating to the assignment, an independence in mental attitude is to be maintained by the

auditor or auditors.

c.

A sufficient understanding of the internal control

system is to be obtained to plan the audit and to

determine the nature, timing, and extent of tests

to be

performed.

d.

Sufficient competent evidential matter is to be

obtained through inspection, observation, inquiries,

and confirmations to afford a reasonable basis for

an

opinion regarding the financial statements

under

examination.

ANSWER:

30.

is it

a.

Usually requires larger sample sizes than statistical

sampling.

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.

ANSWER:

31.

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

random

of the

a.

b.

c.

d.

150

sample of 100 invoices. In this situation, which

following outcomes illustrates underassessment?

The auditor finds five deviations and concludes that

procedures work inadequately. The actual population

deviation rate is 2%.

The auditor finds no deviations and concludes that

procedures work adequately. The true population

deviation rate is 5%.

The auditor finds no deviations and concludes that the

procedures work adequately. The true population

deviation rate is 2%.

The auditor finds five deviations and concludes that

procedures work inadequately. The true population

deviation rate is 6%.

ANSWER:

32.

concerned with the number of a client's sales invoices

that

contain mathematical errors, the auditor would most

likely

utilize

a.

Random sampling with replacement.

b.

Sampling for attributes.

c.

Sampling for variables.

d.

Stratified random sampling.

ANSWER:

33.

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 sample 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.

ANSWER:

34.

evidence which has been obtained through the use of

statistical sampling. Which of the following

151

risks is an

example of the risk of underassessment of control

risk?

a.

Failure to properly define the population to be

sampled.

b.

Failure to draw a random sample from the population.

c.

Failure to accept the statistical hypothesis that

internal control is unreliable when, in fact, it is.

d.

Failure to accept the statistical hypothesis that a

book value is not materially misstated when the true

book value is not materially misstated.

ANSWER:

35.

control risk and decreased substantive testing. This

underassessment occurred because the true occurrence rate in

the population was

a.

Less than the risk of underassessment in the auditor's

sample.

b.

Less than the occurrence rate in the auditor's sample.

c.

More than the risk of underassessment in the auditor's

sample.

d.

More than the occurrence rate in the auditor's sample.

ANSWER:

36.

remain constant, changing the specified precision from 6% to

10%, and changing the specified reliability from 97% to 93%

would cause the required sample size to

a.

Increase.

b.

Remain the same.

c.

Decrease.

d.

Change by 4%.

ANSWER:

37.

in determining the sample size for a test of controls?

a.

Population size.

b.

Tolerable rate.

c.

Risk of underassessment.

d.

Expected population occurrence rate.

ANSWER:

152

38.

errors is 3%. The auditor has established a tolerable

rate

of 5%. In the review of client invoices the auditor

should

use

a.

Stratified sampling.

b.

Variable sampling.

c.

Discovery sampling.

d.

Attribute sampling.

ANSWER:

39.

invoices processed during the year. The auditor designed a

statistical sample that would provide a 1% risk of assessing

control risk too low (99% confidence) that not more than 7%

of the sales invoices lacked approval. The auditor estimated

from previous experience that about 2 1/2% of the sales

invoices lacked approval. A sample of 200 invoices was

examined and 7 of them were lacking approval. The

auditor

then determined the upper occurrence limit to be

8%. In the

evaluation of this sample, the auditor decided to

increase

the level of the preliminary assessment of control

risk

because the

a.

Tolerable rate (7%) was less than the achieved upper

occurrence limit (8%).

b.

Expected occurrence rate (7%) was more than the

percentage of errors in the sample (3 1/2%).

c.

Achieved upper occurrence limit (8%) was more than the

percentage of errors in the sample (3 1/2%).

d.

Expected occurrence rate (2 1/2%) was less than the

tolerable rate (7%).

ANSWER:

40.

application, a measure of precision is required. Which of

the following statements is true regarding precision?

a.

Precision is subtracted from the tolerable rate of

error to determine the acceptability of sample

results.

b.

Precision is added to the tolerable rate

of error to

determine the acceptability of sample

results.

c.

Precision is subtracted from the

sample occurrence rate

and the result is compared to the

tolerable rate of

error.

d.

Precision is added to the sample occurrence rate and

the result is compared to the tolerable rate of error.

153

ANSWER:

41.

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.

ANSWER:

42.

statistical sampling for control testing?

a.

The population size has little or no effect on

determining sample size except for very small

populations.

b.

The expected population occurrence rate has little or

no effect on determining sample size except for

very

small populations.

c.

As the population size doubles, the sample size also

should double.

d.

For a given tolerable rate, a larger sample size should

be selected as the expected population deviation rate

decreases.

ANSWER:

43.

reimbursement claims is within the five-percent tolerance

level set by management. What sampling plan should the

auditor use?

a.

Variables sampling.

b.

Attribute sampling.

c.

Judgment sampling.

d.

PPS sampling.

ANSWER:

44.

$5 or less. The parameter to be estimated is the error

rate, which might be as high as 10%. The auditor is

most

likely to use

a.

b.

c.

d.

Block sampling.

Variables sampling.

Attributes sampling.

Discovery sampling.

ANSWER:

45.

154

non-statistical (judgmental) sample is that with a

statistical sample:

a.

No judgment is required, everything is by formula.

b.

A smaller sample size can be used.

c.

More accurate results are obtained.

d.

Population estimates with measurable reliability can be

made.

ANSWER:

COMPLETION:

47.

situations where a visible

in the form

of

exists.

ANSWER:

48.

sampling is a more

approach to inference.

ANSWER:

49.

whereas

ANSWER:

50.

SUBJECTIVE

estimates the frequency of events,

is an estimate of amount.

ATTRIBUTE SAMPLING, VARIABLES SAMPLING

The

is the anticipated

error rate, whereas the

is

the maximum rate of error acceptable to the auditor, while

still warranting a lowering of assessed control risk below

the maximum level.

ANSWER:

155

51.

The

size.

ANSWER:

52.

procedures relevant to an audit, the

the tolerable

occurrence rate.

ANSWER:

53.

`

BETA

PROBABILITY

alternative to the use of random number tables or computergenerated numbers is

.

ANSWER:

56.

____________

sample must be drawn on a

basis.

ANSWER:

55.

LOWER

risk.

ANSWER:

54.

NARROWER

SYSTEMATIC SAMPLING

Under conditions of

detection risk, a minimal

quantity of audit evidence is needed.

ANSWER:

HIGH

MATCHING:

57.

A.

B.

C.

D.

E.

F.

G.

H.

I.

J.

K.

Attribute sampling

Alpha risk

Discovery sampling

Beta risk

Expected occurrence rate

Precision

Discovery sampling

Sampling risk

Systematic sampling

Tolerable occurrence rate

Upper occurrence limit

L.

156

Variables sampling

____1.

____2.

____3.

____4.

Risk of underassessment.

____5.

____6.

will be incorrect.

____7.

nth item in the population until the requisite sample

size has been reached.

____8.

sampling.

____9.

Risk of overassessment.

SOLUTION:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

A

C

E

D

J

H

I

K

B

F

PROBLEM/ESSAY:

58.

internal controls over the customer billing function of

Jacks Wholesale Hardware, an audit client. Hopkins has

identified the following attributes to be tested. For each

attribute, indicate the appropriate sampling unit and

carefully define what constitutes an error.

157

1.

2.

3.

4.

5.

6.

7.

8.

9.

type and quantity of goods?

Does the shipping order agree with the invoice as to

type and quantity of goods?

Has customer credit been approved?

Does the invoice amount cause the customer to exceed

the prepared credit limit?

Have goods been billed but not shipped?

Have goods been shipped but not billed?

Do invoiced prices agree with official price lists?

Do credit and discount terms appearing on face of

customer invoice accord with company policy?

Are proper accounts debited and credited?

SOLUTION:

1.

ERROR:

Lack of agreement between invoice and order

as to:

Type of goods

Quantity of goods

Price of goods

Credit and discount terms

2.

ERROR:

Lack of agreement between invoice and

shipping order as to:

Type of goods

Quantity of goods

3.

ERROR:

Lack of evidence of credit approval on face

of invoice

4.

ERROR:

Invoice amount plus previous customer

balance exceeds prepared credit limit

5.

ERROR:

Shipping order and/or bill of lading not

attached to customer invoice

6.

ERROR:

Matching invoice not located

7.

ERROR:

158

and no evidence of proper approval of

billed price

8.

ERROR:

Credit and/or discount terms at variance with

company policy, and no evidence of proper

approval of quoted credit and discount

terms.

9.

ERROR:

Incorrect debits or credits appearing on face

of invoice and not corrected before posting

accounts.

59.

examination of documentary evidence for tests of

internal

controls. Using a vouchering and vendor billing application

as an example, assume that you are interested in evaluating

internal controls relative to ordering goods, receiving

goods, and processing vendor invoices. Discuss how

attribute sampling might assist you in the following

phases

of your tests of controls:

a.

Determining the number of vouchers to test;

b.

Selecting the vouchers for testing;

c.

Evaluating the results of the voucher test;

d.

Assessing audit risk associated with the

expenditure cycle.

SOLUTION:

a. In determining the number of vouchers to test, the

auditor will need to set a tolerable occurrence rate and an

acceptable risk of underassessment. These parameters,

along with an estimated occurrence rate may then be used as

inputs to determining sample size.

b. If vouchers are prenumbered, the auditor can elect to use

a random selection approach to selecting vouchers test

for predefined attributes.

c. Having examined the sample for the attributes of

interest, the auditor can calculate the observed error

rate and the upper occurrence limit.

d. The upper occurrence limit can be compared with the

tolerable occurrence rate to support raising or lowering

the assessed level of control risk.

159

60.

Hopkins Manufacturing, an audit client. He has identified

the following attributes of interest for testing purposes:

1.

Correctness of pay rates and hours used in

preparing the payroll summary;

2.

Genuineness of listed employees;

3.

Correctness of gross pay, withholdings, and net

pay;

4.

Correctness of debits and credits.

A pilot test of forty payroll transactions revealed the

following errors: One transaction revealed an

incorrect

pay rate; two transactions resulted in incorrect

calculations of either gross pay or withholdings; and two

transactions resulted in erroneous debits or credits. All

listed employees were found to be working for the company

during the pay period being tested. Jones believes that

four or more errors for each of the four attributes is

significant.

Required:

a.

Based on the pilot sample, calculate the expected

occurrence rate and the tolerable occurrence rate for

each attribute.

b.

In determining sample size, Jones can select an

expected occurrence rate ranging from the low for

attribute number 2 to the high for attributes 3 and 4.

What impact will a low rate relative to a high rate

have on the calculated sample size?

c.

What other factors must Jones consider before

determining the sample size?

c.

Assuming that a sample of 100 payroll summary entries

produced the following calculated upper occurrence

limits, what impact will these limits have on

Jones substantive audit program?

Attribute

Attribute

Attribute

Attribute

1:

2:

3:

4:

7.0%

4.0%

12.0%

6.0%

SOLUTION:

a.

b.

c.

d.

160

Attribute No. 1: 2.5%

Attribute No. 2: 0.0%

Attribute No. 3: 5.0%

Attribute No. 4: 5.0%

The higher the expected occurrence rate, the larger

will be the sample size.

Jones must determine the acceptable risk of

underassessing control risk.

Only attribute 3 produces an unacceptable upper

occurrence limit, exceeding the tolerable rate of 10%.

Given incorrect calculation of gross pay, withholdings,

and net pay, Jones should plan to focus more heavily

on inventory costing, inasmuch as inventory includes

both direct and indirect labor components. He should

also concentrate on payroll cost included in general

and administrative expense, as well as on accrued

payroll and payroll taxes payable at year end.

Incorrect calculation of gross pay and withholdings

will also impact the calculation of employers payroll

tax expense. Therefore, Jones must plan to audit these

accounts more intensively than under conditions of

strong internal control.

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