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___22. Which of the following statements us correct concerning statistical sampling for tests of controls?
a. The population size has little or no effect on determining sample size except for very small populations.
b. The expected population deviation rate has little or no effect on determining sample size except for very small populations.
c. As the population size doubles, the sample size should also double.
d. For a given tolerable rate, a larger sample size should be selected as the expected population deviation rate decreases.
___23. It will be appropriate to audit all the items that make up a class of transactions or account balance (100% examination), except
a. When the class of transactions or account balance consists of a large number of small value items.
b. When the class of transactions or account balance consists of a small number of large value items.
c. When there is a significant risk of misstatement and other selection methods do not provide sufficient appropriate audit
evidence.
d. When the repetitive nature of a calculation or other process performed automatically by the clients computer information
system makes a 100% examination cost effective.
___24. PSA 500 states that the auditor may decide select specific items from a population based on such factors as the auditors
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.
___25. 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 managements 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 auditors planned assessed level of control risk when the true operating effectiveness of internal control
justifies such an assessment.
d. Contains misstatements that could be material to the financial statements when aggregated with misstatements in other
account balances or transactions classes.
___26. Given random selection, the same sample size, and the same tolerable deviation rate for the testing of two unequal populations,
the risk of assessing control risk too low for the larger population is
a. Higher than the risk of assessing control risk too low for the smaller population.
b. Lower than the risk of assessing control risk too low for the smaller population.
c. The same as the risk of assessing control risk too low for the smaller population.
d. Indeterminable relative to the risk of assessing control risk too low for the smaller population.
___27. 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.
___28. Which of the following statements is correct concerning statistical sampling in tests of controls?
a. In determining the tolerable rate, an auditor considers detection risk and the sample size.
b. Deviations from specific control activities at a given rate ordinarily result in misstatement at a lower rate.
c. As the population size increases, the sample size should increase proportionately.
d. There is an inverse relationship between the expected population deviation rate and the sample size.
___29. An attribute sampling plan may be used to test the effectiveness of controls. The auditors evaluation to the
sampling results ordinarily leads to a conclusion concerning
a. The relation of the population deviation rate to the tolerable rate.
b. Monetary precision exceeding a certain predetermined amount.
c. The population value not being misstated by more than a predetermined amount.
d. Population characteristics occurring at least once in the population.
___30. 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 auditors sample exceeds the tolerable rate, but the deviation rate in the population is
less than the tolerable rate.
b. The deviation rate in the auditors sample is less than the tolerable rate, but the deviation rate in the population
exceeds the tolerable rate.
c. The deviate rates of both the auditors sample and the population are less than the tolerable rate.
d. The deviation rates of both the auditors sample and the population exceed the tolerable rate.
___31. Which of the following statements concerning projection of errors found in the sample to the population is
incorrect?
a. For tests of details, the auditor should project monetary errors found in the sample to the population, and should
consider the effect of the projected error on the audit objective and on other areas on the audit.
b. Anomalous errors found in the sample should be included in the projection of errors to the population.
c.
For tests of controls, no explicit projection of errors is necessary since the sample deviation rate is also the
projected deviation rate for the population as a whole.
d. If a class of transactions or an account balance has been divided into strata, the error is projected for each
stratum separately.
___32. In applying variables sampling, an auditor attempts to
a. Predict a monetary population value within a range of precision.
b. Estimate a qualitative characteristic of interest.
c. Determine various rates of occurrence for specified attributes.
d. Discover at least one instance of a critical deviation.
___33. An auditor may decide to increase the risk of incorrect rejection when
a. The cost and effort of selecting additional sample items are low.
b. Increased reliability from sample is desired.
c. Many differences (audit value minus recorded value) are expected.
d. Initial sample results do not support the planned level of control risk.
___34. 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. Continue to draw new samples until all the unusually large disbursements appear in the sample.
b. Increase the sample size to reduce the effect of the unusually large disbursements.
c. Stratify the cash disbursements population so that the unusually large disbursements are selected.
d. Set the tolerable rate of deviation at a lower level than originally planned.
___35. 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 a larger sample size?
a. Smaller measure of tolerable misstatement.
b. Smaller expected frequency of errors.
c. Greater reliance on analytical procedures.
d. Greater reliance on internal control.
___36. If certain forms are not consecutively numbered
a. Selection of a random sample probably is not possible.
b. Systematic sampling may be appropriate.
c. Random number tables cannot be used.
d. Stratified sampling should be used.
___37. Which of the following statements relating to stratification is incorrect?
a. When performing tests of details of transactions and account balances, the population is often stratified by
monetary value.
b. The results of audit procedures applied to a sample of items within a stratum can be projected to the entire
population.
c. When verifying the valuation assertion for accounts receivable, account balances may be stratified by age.
d. Stratification reduces the variability of items within each stratum.
___38. Which of the following sample selection methods is not appropriate when using statistical sampling?
a. Random selection
b. Systematic selection
c. Monetary unit sampling
d. Haphazard selection
___39. Which of the following most likely would be an advantage in using classical variables sampling rather than
probability-proportional-to-size sampling?
a. An estimate of the standard deviation of the populations recorded amount 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.
___40. The use of the ratio estimation sampling technique is most effective when
a. The calculated audit amounts are approximately proportional to the clients book amounts.
b. A relatively small number of differences exist in the population.
c. Estimating populations whose records consist of quantities, but not of book values.
d. Large overstatement differences and large understatement differences exist in the population.
Solution
1. D
2. B
3. C
4. A
5. B
6. C
7. B
8. D
9. D
10. B
11. A
12. D
13. B
14. C
15. D
16. D
17. A
18. C
19. B
20. D
21. B
22. A
23. A
24. C
25. C
26. A
27. D
28. A
29. A
30. B
31. B
32. A
33. A
34. C
35. A
36. B
37. B
38. D
39. C
40. A