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Before answering this test, make sure you have read the assigned readings.
What is the primary objective of using stratified sampling in auditing? *
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To increase the confidence level at which a decision will be reached from the results of
the sample selected.
To determine the occurrence rate for a given characteristic in the population being
studied.
To decrease the effect of variance in the total population.
To determine the precision range of the sample selected.
Precision is defined as the range (plus or minus) within which the true answer most
likely falls. Reliability, also referred to as the confidence level, is the likelihood that the
sample range contains the true value. Of the following statements concerning precision
and reliability, which one is not true? *
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Lower than the expected occurrence rate in the related accounting records.
Higher than the expected occurrence rate in the related accounting records.
Identical to the expected occurrence rate in the related accounting records.
Unrelated to the expected occurrence rate in the related accounting records.
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 materially misstated. This situation illustrates the
risk of: *
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Incorrect rejection.
Incorrect acceptance.
Assessing control risk too low.
Assessing control risk too high.
Which of the following is not a likely item on which to apply stratification techniques? *
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Direct.
Inverse.
Varied.
Indeterminable.
Of the following statements, which one best differentiates statistical sampling from
nonstatistical sampling? *
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The auditor plans to estimate the total dollar value of the inventory when a recorded
book value does not exist.
The auditor plans to make a statement concerning the total dollar amount of error in the
population from the recorded book value.
The auditor wishes to accept or reject the hypothesis that the proportion of defective
parts in the population is less than 5%.
The auditor wishes to estimate the proportion of defective parts in the population.
Which of the following is not a type of statistical method that provides results in dollar
terms? *
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Variables sampling.
Attributes sampling.
Monetary-unit sampling.
Sampling with probability proportional to size.
The relationship between required sample size and the acceptable risk of incorrect
acceptance is: *
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Inverse.
Direct.
Proportional.
Indeterminate.
The final step in the evaluation of the audit results is the decision to: *
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Difference estimation.
Mean-per-unit estimation.
Ratio estimation.
Monetary-unit sampling.
Which of the following is the auditor least likely to consider when estimating
misstatements in the population? *
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Yes Yes
No No
Yes No
No Yes
Use of the ratio estimation sampling technique to estimated dollar amounts is
inappropriate when: *
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The total book value is known and corresponds to the sum of all the individual book
values.
A book value for each sample item is unknown.
There are some observed differences between audited values and book values.
The audited values are nearly proportional to the book values.
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. Which of the following is not likely to be an acceptable reaction to
this discovery? *
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Merchandise received.
Vendors' invoices.
Canceled checks.
Receiving reports.
Sampling used for tests of details provides results in terms of: *
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Exception rates.
Percentages.
Pesos
Expectation rates.
The variables sampling method which generally results in smaller sample sizes than any
other method is: *
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Ratio estimation.
Difference estimation.
Monetary-unit sampling.
Mean-per-unit estimation.
The risk the auditor is willing to take of accepting a balance as correct when the true
misstatement in the balance under audit is greater than the tolerable misstatement is: *
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Increased.
Reduced.
Unaffected.
Modified.
An advantage of statistical over non-statistical sampling is that statistical sampling: *
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Reduction in
Increase in
Elimination of
Increase or decrease
When auditors sample for tests of details of balances, the objective is to determine
whether the: *
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tolerable misstatement
acceptable risk of incorrect rejection
estimate of misstatements in the population
acceptable audit risk
What is the purpose of applying stratified sampling to a population? I. To avoid items that
may contain misstatements; II. To emphasize certain items and deemphasize others *
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Yes Yes
No No
Yes No
No Yes
As the amount of misstatements expected in the population approaches tolerable
misstatement, the planned sample size will: *
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Decrease.
Increase.
Vary based on characteristics of the population.
Be unaffected.
Which of the following statements concerning alpha and beta risk is true? *
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Incorrect rejection.
Alpha error.
Incorrect acceptance.
Type I error.
The acceptable risk of incorrect acceptance is most related to: *
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Audit efficiency.
Audit results.
Audit effectiveness.
Audit estimation.
It means an error that arises from an isolated event that has not recurred other than on
specifically identifiable occasions and is therefore not representative of errors in the
population *
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Tolerable error
Anomalous error
Isolated error
Unexpected error
Which of the following best illustrates the concept of sampling risk? *
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Accuracy.
Completeness.
Existence.
All of the above can be assessed using monetary unit sampling.
Monetary unit sampling is also referred to as all of the following except: *
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Attribute sampling.
Dollar unit sampling.
Cumulative monetary amount sampling.
Sampling with probability proportional to size.
In examining cash disbursements, an auditor plans to choose a sample using systematic
selection with a random start. The primary advantage of such systematic selection is that
population items *
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Which include errors will not be overlooked when the auditor exercises compatible
reciprocal options.
May occur in a systematic pattern, thus making the sample more representative.
May occur more than once in a sample.
Do not have to be pre-numbered in order for the auditor to use the technique.
When using systematic selection procedures with monetary-unit sampling of accounts
receivable, the interval is determined by: *
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True
False
Sampling risk refers to the possibility that: *
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The auditor may use a less than optimal statistical method for the circumstances, e.g.
difference estimation instead of ratio estimation.
The auditor may fail to recognize an error that is included in the sample.
Even though a sample is properly chosen, it may not be representative of the population.
The confidence level and/or precision established by the auditor are not appropriate.
Which of the following statements concerning sample size is true? *
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Is reduced.
Is increased.
Is not changed.
May be reduced or increased depending upon other circumstances.
The most commonly used method of statistical sampling for tests of details of balances
is: *
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Attributes sampling.
Systematic sampling.
Discovery sampling.
Monetary-unit sampling.
Which of the following factors is generally not considered in determining the sample size
for a test of controls? *
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Population size.
Tolerable rate.
Risk of underassessment.
Expected population occurrence rate.
Tolerable misstatement is used to: I. Determine sample size. II. Select the sample. III.
Evaluate results. *
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Yes Yes No
No Yes No
No No Yes
Yes No Yes
Correct answer
Yes No Yes
In a probability proportional to size (PPS) sample, all population physical audit units with
an amount equal to or greater than the amount of the interval will automatically be
included in the sample if the auditor uses: *
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Random selection.
Systematic selection.
Block selection.
Stratified selection.
An auditor samples cash disbursement records for significant 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 *
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Cluster sample.
Discovery sample.
Systematic sample. .
Stratified sample