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| 1 | |
In which of the following situations would the use of variables sampling be least appropriate? |
| | A) | Confirming accounts receivable with the client's customers. |
| | B) | Observing inventory items to determine if recorded quantities are correct. |
| | C) | Examining purchase orders for evidence of proper approval. |
| | D) | Selecting items of property, plant and equipment for physical inspection. |
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| 2 | |
How does the auditor establish tolerable misstatement in a variables sampling application? |
| | A) | Based on prior assessments of audit risk, risk of material misstatement, and analytical procedures risk. |
| | B) | Based on the recorded amount of the account balance as well as the relationship of the account balance with important financial statement subtotals. |
| | C) | Based on findings in prior years' audits or based on a small sample taken during the current year. |
| | D) | Based on the anticipated cost of conducting additional substantive testing procedures. |
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| 3 | |
Which of the following would not result in a reduction in the risk of incorrect acceptance? |
| | A) | An increase in the desired level of audit risk from 3% to 5%. |
| | B) | The inability of the auditor to rely on the internal control as planned. |
| | C) | An increase in the susceptibility of the account balance to misstatement. |
| | D) | An inability to appropriately use analytical procedures in the audit examination. |
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| 4 | |
Which of the following factors is most likely established based on the results of prior years' audit examinations? |
| | A) | Expected misstatement. |
| | B) | Population size. |
| | C) | Risk of incorrect acceptance. |
| | D) | Tolerable misstatement. |
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| 5 | |
Under monetary unit sampling, the projected misstatement is determined by multiplying the ________ by the _________. |
| | A) | Sampling interval; incremental confidence factor |
| | B) | Sample size; incremental confidence factor |
| | C) | Sampling interval; tainting percentage |
| | D) | Sample size; tainting percentage |
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| 6 | |
Which of the following factors has a direct relationship with sample size in a variables sampling application?
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| | A) | a. |
| | B) | b. |
| | C) | c. |
| | D) | d. |
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| 7 | |
Which of the following is not a difference in the application of monetary unit sampling (MUS) and classical variables sampling? |
| | A) | MUS methods are more likely than classical variables sampling methods to select transactions or components reflecting relatively large dollar amounts. |
| | B) | MUS does not explicitly consider the risk of incorrect rejection in calculating sample size, while classical variables sampling methods do consider this risk. |
| | C) | MUS provides an estimate of the amount of misstatement in an account balance or class of transactions, while classical variables sampling provides an estimate of the recorded account balance. |
| | D) | Classical variables sampling considers the standard deviation in determining sample size and evaluating sample results, while MUS methods do not consider the standard deviation. |
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| 8 | |
Which of the following statements is not true with respect to the risk of incorrect acceptance? |
| | A) | The risk of incorrect acceptance occurs when the audit team's evidence suggests that the account balance is not materially misstated. |
| | B) | The risk of incorrect acceptance is normally of greater concern to the audit team than the risk of incorrect rejection. |
| | C) | The risk of incorrect acceptance occurs when the client's true (but unknown) account balance is not materially misstated. |
| | D) | The risk of incorrect acceptance results in an effectiveness loss to the audit team. |
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| 9 | |
Which of the following steps would ordinarily be done earliest in a monetary unit sampling application? |
| | A) | Project identified misstatements to the sampling interval from which they were selected. |
| | B) | Calculate the incremental allowance for sampling risk. |
| | C) | Determine the upper limit on misstatements. |
| | D) | Calculate the tainting percentage. |
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| 10 | |
Which of the following types of populations would be most suited to the use of monetary unit sampling (MUS)? |
| | A) | A client's accounts receivable balance is comprised of individual customer accounts ranging from $2,000 to $8,000 that contain numerous misstatements. |
| | B) | A client's accounts receivable balance is comprised of individual customer accounts ranging from $1,000 to $10,000,000 that contain few misstatements. |
| | C) | Sales invoices on which client personnel are required to provide an indication that quantities were verified. |
| | D) | Applications of an important control policy that has a relatively low rate of expected deviations, each of which could result in a significant financial statement misstatement. |
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| 11 | |
Which of the following is not true of nonstatistical variables sampling? |
| | A) | It normally results in smaller sample sizes than statistical sampling methods. |
| | B) | It does not require random selection methods to be used. |
| | C) | An allowance for sampling risk should be added to the projected misstatement before the audit team can determine the balance is acceptable. |
| | D) | All of these statements are true |
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