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Multiple Choice
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1

In an attribute test in which the auditor seeks to obtain assurance that all check requests have been properly authorized, he/she should consider the tolerable deviation rate when determining sample size. The auditor should also consider:
 The Average Dollar
Value of the Check
Requests Risk		The Allowable Risk
of Assessing Control
Too Low
a.YesYes
b.YesNo
c.NoNo
d.NoYes
A)Option A
B)Option B
C)Option C
D)Option D
2

An auditor plans to examine a sample of 30 purchase orders for proper approval as prescribed by the client's internal accounting control procedures. One of the purchase orders in the chosen sample of 30 cannot be found, and the auditor is unable to use alternative procedures to test whether that purchase order was properly approved. The auditor should
A)Choose another purchase order to replace the missing purchase order in the sample.
B)Consider this compliance test invalid and proceed with substantive tests because internal control cannot be relied upon.
C)Treat the missing purchase order as a deviation for the purpose of evaluating the sample.
D)Select a completely new set of 30 purchase orders.
3

For which of the following audit tests would an auditor most likely use attribute sampling?
A)Making an independent estimate of the amount of a LIFO inventory.
B)Examining invoices in support of the valuation of equipment additions.
C)Selected accounts receivable for confirmation of account balances.
D)Inspecting employee time cards for proper supervisor approval.
4

The likelihood of assessing control risk too high is the risk that the sample selected to test controls:
A)Does not support the auditor's planned assessed level of control risk when the true operating effectiveness of the control justifies such an assessment.
B)Does support the auditor's planned assessed level of control risk when the true operating effectiveness of the control does not justify such an assessment.
C)Contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transaction classes.
D)Contains proportionately fewer monetary errors or deviations from prescribed internal controls than exist in the balance or class as a whole.
5

In planning a statistical sample for a test of controls, an auditor increased the expected population deviation rate from the prior year's rate as a result of the prior year's tests of controls and changes in the overall control environment. The auditor would then also have to increase the planned:
A)Tolerable deviation rate.
B)Allowance for sampling risk.
C)Sample size.
D)Risk of assessing control risk too low.
6

Which of the following statements is true in an attributes sampling plan where the tolerable deviation rate is 6%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the risk of assessing control risk too low is 5%?
A)The auditor is likely to increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.
B)The auditor must increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.
C)The auditor must increase control risk because the computed upper deviation rate is greater than the risk of assessing control risk too low.
D)The auditor is likely to increase control risk because the computed upper deviation rate is greater than the risk of assessing control risk too low.
7

An auditor conducted extensive substantive testing in an audit area in which client controls were designed and functioning very well. This inefficient audit suggests:
A)The risk of assessing control risk too low was too large.
B)The risk of assessing control risk too high was too small.
C)The auditor chose a tolerable deviation rate that was too large.
D)There is an overly small allowance for sampling risk.
8

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)A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.
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.
9

Which of the following statements is true regarding non-statistical sampling?
A)It controls for the auditor's exposure to sampling risk.
B)It's use is required by the Public Company Accounting Oversight Board.
C)It gives greater assurance [than statistical sampling] that samples are randomly selected.
D)Firms often base sample size selection based on no expected deviations.
10

When assessing the tolerable deviation rate (TDR), the auditor should consider that while deviations from control procedures increase the risk of material misstatements, such deviations may not necessarily result in errors. This explains why:
A)Deviations from examined control procedures at a given rate would normally be expected to result in a higher rate of dollar errors.
B)A recorded disbursement that is properly authorized may nonetheless contain a material dollar error.
C)A recorded disbursement that is not properly authorized may nonetheless be recorded properly in the cash disbursements journal.
D)Deviations would result in dollar errors in the accounting records only when they occurred in different transactions.





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