1. Which of the following is an example of using statistical sampling?
a. Statistical sampling will be looked upon by the courts as providing superior audit evidence.
b. Statistical sampling requires the auditor to make fewer judgmental decisions.
c. Statistical sampling aids the auditor in evaluating results.
d. Statistical sampling is more convenient to use than nonstatistical sampling.
2. Which of the following is not an advantage of using statistical sampling?
a. Statistical sampling aids in the design of an efficient sample.
b. Statistical sampling allows the auditor to measure the sufficiency of the evidential matter obtained.
c. Statistical sampling allows the auditor to greatly reduce substantive testing.
d. Statistical sampling provides a means for mathematically measuring the degree of risk that results from examining only part of a population.
3. Which of the following best illustrates the concept of sampling risk?
a. An auditor may select audit procedures that are not appropriate to achieve the specific objective.
b. The documents related to the chosen sample may not be available for inspection.
c. A randomly chosen sample may not be representative of the population as a whole.
d. An auditor may fail to recognize deviations in the documents examined.
4. The application of statistical sampling techniques is least related to
a. The first standard of FW.
b. The second standard of FW.
c. The second general standard
d. The third standard of FW.
5. When performing tests of controls which of the following is most useful?
a. Stratified random sampling.
b. Variable sampling.
c. Unrestricted random sampling with replacement.
d. Attribute sampling.
6. Respectively, attribute sampling and variables sampling are
a. Quantitative and qualitative in nature.
b. Qualitative and quantitative in nature.
c. Both qualitative and quantitative in nature.
d. None of these.
7. The risk that the assessed level of control risk based on the sample is less than the true operating effectiveness of the control structure policy or procedure is termed
a. The risk of incorrect acceptance.
b. The risk of incorrect rejection.
c. The risk of assessing too low.
d. The risk of assessing too high.
8. The advantage of using statistical sampling techniques is that such techniques
a. Mathematically measure risk.
b. Eliminate the need for judgmental decisions.
c. Are easier to use than other sampling techniques.
d. Have been established in the courts to be superior to nonstatistical sampling.
9. Which of the following is an element of sampling risk?
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 a deviation on a document inspected by the auditor.
d. Failing to perform audit procedures that are required by the sampling plan.
10. Statistical sampling (SS) provides a technique for
a. Exactly defining materiality.
b. Greatly reducing the amount of substantive testing.
c. Eliminating judgment in testing.
d. Measuring the sufficiency of evidential matter.
11. From prior experience, a CPA is aware of the fact that cash disbursements contain a few unusually large disbursements. In using statistical sampling, the CPA's best course of action is to
a. Eliminate any unusually large disbursements that appear in the sample.
b. Continue to draw new samples until no unusually large disbursements appear in the sample.
c. Stratify the cash disbursements population so large disbursements are reviewed separately.
d. Increase the sample size to lessen the effect of the unusually large disbursements.
12. The auditor's failure to recognize a misstatement in an amount or a deviation in an internal control, data-processing procedure is described as
a. Statistical error.
b. Sampling error.
c. Standard error.
d. Nonsampling error.
13. If the auditor is concerned that a population may contain exceptions, the determination of a sample size sufficient to include at least one such exception is a characteristic of
a. Discovery sampling.
b. Variable sampling.
c. Random sampling.
d. Dollar-unit sampling.
14. An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client's internal control procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this limitation and
a. Evaluate the results as if the sample size had been 19.
b. Treat the missing check as a deviation when evaluating the sample.
c. Treat the missing check in the same manner as the majority of the other l9 checks, i.e. countersigned or not.
d. Choose another check to replace the missing check in the sample.
15. The risk that the assessed level of control risk based on the sample is greater than the true operating effectiveness of the control structure policy or procedure is termed
a. Risk of assessing too high.
b. Risk of assessing too low.
c. Incorrect acceptance.
d. Incorrect rejection.
16. In testing accounts receivable, an auditor sends out positive confirmation requests to 100 randomly selected customers. A customer returns the confirmation indicating that the balance is correct when, in fact, the balance is overstated. This is an example of:
A. Projected misstatement.
B. Sampling error.
C. Standard error.
D. Nonsampling error.
17. If all other factors specified in an attributes sampling plan remain constant, changing the specified tolerable rate from 6% to 10%, and changing the specified risk of assessing control risk too low from 3% to 7% would cause the required sample size to:
A. Increase.
B. Remain the same.
C. Decrease.
D. Change by 4%.
18. Which of the following factors does an auditor need to consider in planning a particular audit sample for a test of control?
A. Number of items in the population.
B. Total dollar amount of the items to be sampled.
C. Acceptable level of risk of assessing control risk too low.
D. Tolerable misstatement.
19. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the:
A. Efficiency of the audit.
B. Effectiveness of the audit.
C. Selection of the sample.
D. Audit quality controls.
20. 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:
A. Incorrect acceptance.
B. Incorrect rejection.
C. Assessing control risk too high.
D. Assessing control risk too low.
The 2,000 accounts receivable of ABC Company have a total book value of $40,000. Bob Rotter, CPA, has selected and audited a sample of 100 accounts with a total book value of $1,950. The audited value of the 100 accounts in the sample is $1,875.
21. Using the mean-per-unit estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
22. Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
23. Using the difference estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600