1.

A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance
that the monetary amount set by the auditor is not exceeded by the actual misstatement in the population is
a. Tolerable misstatement
b. Tolerable rate of deviation
c. Anomaly
d. Expected misstatement
2. A rate of deviation from prescribed internal control procedures set by the auditor in respect of which the auditor seeks
to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate
of deviation in the population is
a. Tolerable misstatement
b. Tolerable rate of deviation
c. Anomaly
d. Expected misstatement
3. In attributes sampling, to support the initial assessment of control risk, the expected deviation rate must be ______ than
the deviation rate
a. Lower
b. Higher
c. Equal
d. Indeterminate
4. As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This
assessment occurred because the true deviation rate in the population was
a. Less than the risk of assessing control risk too low, based on the auditor’s sample
b. Less than the deviation rate in the auditor’s sample
c. More than the risk of assessing control risk too low, based on the auditor’s sample
d. More than the deviation rate in the auditor’s sample
5. 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
6. Sampling is applicable for selected auditing procedures used in gathering audit evidences. Which of the following
procedures requires conducting sampling?
a. Scanning accounting records for unusual items.
b. Analytical procedures.
c. Obtaining understanding of internal control.
d. Tracing sales transactions.
7. The maximum rate of deviation from a prescribed control structure policy or procedure that an auditor is willing to
accept without modifying the planned assessed level of control risk is called
a. Allowable risk of assessing control risk too low.
b. Tolerable deviation rate
c. Expected population deviation rate
d. Expected rate of occurrence
8. When every sampling unit has the same probability of being selected and every combination of sampling units of equal
s i ze has the same probability of being selected, what sampling technique is used?
a. Random-number sampling
b. Systematic sampling
c. Haphazard sampling
d. Block sampling
9. W hich of the following best illustrates the concept of sampling risk?
a. A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.
b. An auditor may select audit procedures that are not appropriate to achieve the specific objective.
c. An auditor may fail to recognize errors in the documents examined for the chosen sample.
d. The documents related to the chosen sample may not be available for inspection.
10. Which of the following is a classical variables sampling technique that projects the sample average to the total
population by multiplying the sample average by the number of items in the population?
a. Mean-per-unit estimation
b. Difference estimation
c. Ratio estimation
d. Stratification
11. Which of the following is incorrect about statistical and nonstatistical sampling?
a. Both sampling approaches involve judgment in planning.
b. Both sampling approaches can provide sufficient competent evidential matter.
c. The standards require the use of statistical sampling.
d. The auditor can objectively quantify sampling risk using statistical sampling.
12. Which of the following is incorrect regarding projecting misstatements in sampling?
a. The auditor is required to project misstatements for the population to obtain a broad view of the scale of misstatement
but this projection may not be sufficient to determine an amount to be recorded.
b. When a misstatement has been established as an anomaly, it may be excluded when projecting misstatements to the
population.
c. The effect of any misstatement, if uncorrected, still needs to be considered in addition to the projection of the non-
anomalous misstatements.
d. For tests of controls, a projection of deviations is necessary since the sample deviation rate in comparison to the
population as a whole.
13. Which of the following is incorrect regarding sample design, size and selection of items for testing?
a. When designing an audit sample, the auditor shall consider the purpose of the audit procedure and the characteristics of
the population from which the sample will be drawn.
b. The auditor shall determine a sample size sufficient to reduce sampling risk to an acceptably high level.
c. The auditor shall select items for the sample in such a way that each sampling unit in the population has a chance of
selection.
d. The level of sampling risk that the auditor is willing to accept affects the sample size required.
14. Which of the following risks affects audit effectiveness?
a. Alpha risk
b. Type I error
c. Risk of incorrect rejection
d. Risk of assessing control risk too low
15. Which of the following risks affects audit efficiency?
a. Alpha Risk
b. Beta Risk
c. Risk of assessing control risk too low
d. Risk of incorrect acceptance
16. Which of the following sampling techniques reduces variability of items within each stratum and thus, allows sample
size to be reduced without increasing sampling risk?
a. Value-weighted selection
b. Stratification
c. Mean-per-unit
d. Difference estimation
17. “Error” includes
a. Engaging in complex transactions that are structured to misrepresent the financial position or financial performance of
the entity.
b. Concealing, or not disclosing, facts that could affect the amounts recorded in the financial statements.
c. An incorrect accounting estimate arising from oversight or misinterpretation of facts.
d. Intentional misapplication of accounting policies relating to amounts, classification, manner of presentation, or
disclosure.
18. Fraud involving one or more members of management or those charged with governance is referred to as
a. Management fraud
b. Employee fraud.
c. Fraudulent financial reporting.
d. Misappropriation of assets.
19. The auditor is concerned with fraud that causes a material misstatement in the financial statements. There are two types
of intentional misstatements that are relevant to the auditor: misstatements resulting from fraudulent financial reporting
and misstatements resulting from
a. Management fraud.
b. Employee fraud.
c. Misappropriation of assets.
d. Collusion within the entity or with third parties.
20. The auditor is concerned with fraud that causes a material misstatement in the financial statements. There are two types
of intentional misstatements that are relevant to the auditor: misstatements resulting from fraudulent financial reporting
and misstatements resulting from
a. Management fraud.
b. Employee fraud.
c. Misappropriation of assets.
d. Collusion within the entity or with third parties.
21. Fraudulent financial reporting involves intentional misstatements including omissions of amounts or disclosures in
financial statements to deceive financial statement users. It may be accomplished in a number of ways, including
a. Embezzling receipts.
b. Stealing physical assets or intellectual property.
c. Using an entity’s assets for personal use.
d. Manipulation, falsification, or alteration of accounting records or supporting documentation from which financial
statements are prepared.
22. A type of audit the purpose of which is to determine whether the auditee is following specific procedures or rules set
down by some higher authority is called
a. Operational audit
b. Compliance audit
c. Financial audit
d. Forensic audit
23. An audit approach that attempts to identify areas posing the highest probability of financial statement errors and
allocate audit resources to those areas is known as
a. Risk-based auditing
b. Substantive-based auditing
c. Controls-based auditing
d. Error-based auditing
24. Independent auditing cam be described as
a. A branch of accounting
b. A professional activity that measures and communicates financial and business data
c. A discipline which attest to the results of accounting and other functional operations and data
d. A regulating function that prevents the issuance of erroneous or improper financial information
25. Indicate the level of assurance provided audit and related services
a. Audit- High; Review -Moderate; Agreed-upon procedures- None; Compilation - None;
b. Audit -High; Review -None; Agreed-upon procedures-None ; Compilation -None;
c. Audit -Negative; Review -Moderate; Agreed-upon procedures-None ; Compilation - None;
d. Audit-Absolute; Review -High; Agreed-upon procedures -Limited; Compilation -None;