Which of the following statements is correct concerning statistical sampling in tests of controls?

Auditing standards permit both statistical and nonstatistical methods of audit sampling.

Table of Contents

• Auditing standards permit both statistical and nonstatistical methods of audit sampling.
• A Type I error is the risk of incorrect acceptance
• A Type II error is the risk of incorrect acceptance
• Confidence level is the complement of sampling risk
• Confidence level and sampling risk are related to sample size
• The larger the sample, the lower confidence level and the lower the sampling risk
• Audit sampling is commonly used to gather confirmation audit evidence
• Audit sampling is commonly used to gather scanning audit evidence
• Attribute sampling is used to estimate the proportion of a population that possesses a specified characteristic
• With a nonstatistical sampling application, the auditor relies on professional judgement rather than the laws of probability to reach a conclusion about the audit test
• Which of the following best illustrates the concept of sampling risk?
• A randomly chose sample may not be representative of the population as a whole (regarding the characteristic being tested)
• Jones, CPA, believes the industry wide deviation rate of client billing errors is 3% and has established a tolerable deviation rate of 5%. In the review of client invoices, Jones should use
• The tolerable deviation rate for a test of controls is generally
• Higher than the expected rate of deviations in the related accounting records
• The risk of incorrect acceptance related to the
• effectiveness of the audit
• The likelihood of assessing control risk too high is the risk that the sample selected to test controls
• Does no support the auditor's planned assessed level of control risk when the true operation effectiveness of internal control justifies such an assessment.
• For which of the following audit tests would an audit tests would an auditor most likely use attributes sampling
• Inspecting employee time cards for proper approval by supervisors
• Harvey Jones, CPA, uses statistical sampling to test control procedures. What is a benefit of using statistical sampling?
• It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data.
• In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations. The auditor most likely would give broader consideration to the implications of a deviation if it was
• Initially concealed by a forged document.
• An underlying feature of random-based selection of items is that each
• Item in the accounting population should have an opportunity to be selected.
• 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 20 cannot be found. The auditor should consider the reasons for this limitation and
• Treat the missing check as a deviation for the purpose of evaluating the sample
• An auditor is testing internal control procedures that are evidenced on an entity's vouchers. To select the vouchers for testing, the auditor obtains random numbers between the first and last voucher number in the period. If a random number matches the number of a voided voucher, that voucher ordinarily should be replaced by another voucher in the random sample if the voucher
• Which of the following statements is correct concerning statistical sampling in compliance testing?
• The population size has little or no effect on determining sample size except for very small populations.
• In determining the sample size for at least of controls, an auditor should consider the expected deviation rate, desired confidence level, and the
• Tolerable deviation rate.
• In attributes sampling, a 10% change in which of the following factors normally will have the least effect on the size of a statistical sample?
• The computed upper deviation rate is
• The sum of the sample deviation rate and an appropriate allowance for sampling risk
• In attributes sampling, population size has little or no effect on sample size once the population exceeds approximately
• A control is deemed to be more important than thought at the time that attributes sampling parameters were set. The auditor is most likely to respond by
• Decreasing the tolerable deviation rate
• If auditors conducting attributes sampling found that the client deviated from a prescribed control in nine of the first 10 items examined, the auditor is most likely to
• Stop the test and increase control risk
• When testing automated IT controls, the auditor is most likely to do all of the following except
• Increase sample size because the tolerable deviation rate tends to be higher for automated IT controls
• In which of the following cases would the auditor be most likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis
• Tolerable deviation is small and expected deviation is high
• Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?
• Desired confidence level.
• As a result of tests of controls, an auditor incorrectly assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was
• More than the deviation rate in the auditor's sample.
• As a result of tests of controls, an auditor over relied on internal control and decreased substantive testing. This over reliance occurred because the true deviation rate in the population was
• More than the deviation rate in the auditor's sample.
• If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to
• Set control risk at the maximum without sampling
• For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7% , the sample deviation rate is 3% and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?
• Based on a 5% risk of assessing control risk too low, how would an auditor interpret a computed upper deviation rate of 7%
• There is a 5% chance that the deviation rate in the population exceeds 7%
• Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to
• Mathematically measure uncertainty.
• Which of the following best describes the distinguishing feature of statistical sampling
• It provides a means for measuring mathematically the degree of uncertainty that results form examining only part of a population.
• Statistical sampling provides a technique for
• Measuring the sufficiency of evidential matter
• Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor
• Measure the sufficiency of the evidential matter obtained.
• An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods
• provide an objective basis for quantitatively evaluating sample risks.
• An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the
• Sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.
• If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures
• Depending on the size of the sample chosen, the auditor may actually achieve desired precision.
• When performing a test of controls with respect to control over cash receipts, an auditor may use a systematic technique with a start at any randomly selected item. The biggest disadvantage of this type of sampling is that the items in the population
• May occur in a systematic pattern, thus destroying the sample randomness
• For attributes sampling, of the three factors that enter into sample size determination, which two factors an the auditor adjust to reflect the importance of the control?
• Tolerable deviation rate and confidence level
• Which of the following combinations guarantees a larger sample size?
• Increase the desired confidence level and decrease the tolerable deviation rate.
• For a large population of cash disbursement transactions, Smith, CPA, is testing controls by using attribute sampling techniques. Anticipating an expected deviation rate of 3 percent, Smith found from a table that the required sample size is 400 with a tolerable deviation rate of 5 percent and a desired confidence level of 95 percent. If Smith anticipated an expected deviation rate of only 2 percent but wanted to maintain the same tolerable deviation rate and confidence level, the sample size would be closest to
• In nonstatistical sampling for tests of controls, increasing the desired confidence level results in a
• To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the desired confidence level, and the
• Expected population deviation rate
• Which of the following statements is correct concerning statistical sampling in tests of controls
• Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate.
• For an attribute sampling plan, the tolerable deviation rate is 4%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the risk of assessing control risk too low is 5%. Which of the following is true
• The auditor is likely to increase control risk because the computed deviation rate is greater than the tolerable deviation rate.
• Which of the following risks is related to effectiveness of testing?
• The risk of incorrect acceptance
• Which of the following risks is related to efficiency of testing?
• The risk of incorrect rejection
• The term precision relates to
• the difference between expected and tolerable deviation rate
• Audit sampling is commonly used for which type of audit evidence?
• Audit sampling is not used for which type of audit evidence?
• The following types of audit evidence can be tested using audit sampling techniques
• 1. Inspection of tangible assets2. Inspection of records or documents3. Reperformance4. Confirmation

A Type I error is the risk of incorrect acceptance

A Type II error is the risk of incorrect acceptance

Confidence level is the complement of sampling risk

The larger the sample, the lower confidence level and the lower the sampling risk

Audit sampling is commonly used to gather confirmation audit evidence

Audit sampling is commonly used to gather scanning audit evidence

Attribute sampling is used to estimate the proportion of a population that possesses a specified characteristic

With a nonstatistical sampling application, the auditor relies on professional judgement rather than the laws of probability to reach a conclusion about the audit test

Which of the following best illustrates the concept of sampling risk?

A randomly chose sample may not be representative of the population as a whole (regarding the characteristic being tested)

Jones, CPA, believes the industry wide deviation rate of client billing errors is 3% and has established a tolerable deviation rate of 5%. In the review of client invoices, Jones should use

The tolerable deviation rate for a test of controls is generally

Higher than the expected rate of deviations in the related accounting records

effectiveness of the audit

The likelihood of assessing control risk too high is the risk that the sample selected to test controls

Does no support the auditor's planned assessed level of control risk when the true operation effectiveness of internal control justifies such an assessment.

For which of the following audit tests would an audit tests would an auditor most likely use attributes sampling

Inspecting employee time cards for proper approval by supervisors

Harvey Jones, CPA, uses statistical sampling to test control procedures. What is a benefit of using statistical sampling?

It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data.

In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations. The auditor most likely would give broader consideration to the implications of a deviation if it was

Initially concealed by a forged document.

An underlying feature of random-based selection of items is that each

Item in the accounting population should have an opportunity to be selected.

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 20 cannot be found. The auditor should consider the reasons for this limitation and

Treat the missing check as a deviation for the purpose of evaluating the sample

An auditor is testing internal control procedures that are evidenced on an entity's vouchers. To select the vouchers for testing, the auditor obtains random numbers between the first and last voucher number in the period. If a random number matches the number of a voided voucher, that voucher ordinarily should be replaced by another voucher in the random sample if the voucher

Which of the following statements is correct concerning statistical sampling in compliance testing?

The population size has little or no effect on determining sample size except for very small populations.

In determining the sample size for at least of controls, an auditor should consider the expected deviation rate, desired confidence level, and the

Tolerable deviation rate.

In attributes sampling, a 10% change in which of the following factors normally will have the least effect on the size of a statistical sample?

The computed upper deviation rate is

The sum of the sample deviation rate and an appropriate allowance for sampling risk

In attributes sampling, population size has little or no effect on sample size once the population exceeds approximately

A control is deemed to be more important than thought at the time that attributes sampling parameters were set. The auditor is most likely to respond by

Decreasing the tolerable deviation rate

If auditors conducting attributes sampling found that the client deviated from a prescribed control in nine of the first 10 items examined, the auditor is most likely to

Stop the test and increase control risk

When testing automated IT controls, the auditor is most likely to do all of the following except

Increase sample size because the tolerable deviation rate tends to be higher for automated IT controls

In which of the following cases would the auditor be most likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis

Tolerable deviation is small and expected deviation is high

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Desired confidence level.

As a result of tests of controls, an auditor incorrectly assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was

More than the deviation rate in the auditor's sample.

As a result of tests of controls, an auditor over relied on internal control and decreased substantive testing. This over reliance occurred because the true deviation rate in the population was

More than the deviation rate in the auditor's sample.

If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to

Set control risk at the maximum without sampling

For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7% , the sample deviation rate is 3% and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?

Based on a 5% risk of assessing control risk too low, how would an auditor interpret a computed upper deviation rate of 7%

There is a 5% chance that the deviation rate in the population exceeds 7%

Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to

Mathematically measure uncertainty.

Which of the following best describes the distinguishing feature of statistical sampling

It provides a means for measuring mathematically the degree of uncertainty that results form examining only part of a population.

Statistical sampling provides a technique for

Measuring the sufficiency of evidential matter

Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor

Measure the sufficiency of the evidential matter obtained.

An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods

provide an objective basis for quantitatively evaluating sample risks.

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the

Sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures

Depending on the size of the sample chosen, the auditor may actually achieve desired precision.

When performing a test of controls with respect to control over cash receipts, an auditor may use a systematic technique with a start at any randomly selected item. The biggest disadvantage of this type of sampling is that the items in the population

May occur in a systematic pattern, thus destroying the sample randomness

For attributes sampling, of the three factors that enter into sample size determination, which two factors an the auditor adjust to reflect the importance of the control?

Tolerable deviation rate and confidence level

Which of the following combinations guarantees a larger sample size?

Increase the desired confidence level and decrease the tolerable deviation rate.

For a large population of cash disbursement transactions, Smith, CPA, is testing controls by using attribute sampling techniques. Anticipating an expected deviation rate of 3 percent, Smith found from a table that the required sample size is 400 with a tolerable deviation rate of 5 percent and a desired confidence level of 95 percent. If Smith anticipated an expected deviation rate of only 2 percent but wanted to maintain the same tolerable deviation rate and confidence level, the sample size would be closest to

In nonstatistical sampling for tests of controls, increasing the desired confidence level results in a

To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the desired confidence level, and the

Expected population deviation rate

Which of the following statements is correct concerning statistical sampling in tests of controls

Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate.

For an attribute sampling plan, the tolerable deviation rate is 4%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the risk of assessing control risk too low is 5%. Which of the following is true

The auditor is likely to increase control risk because the computed deviation rate is greater than the tolerable deviation rate.

The risk of incorrect acceptance

The risk of incorrect rejection

The term precision relates to

the difference between expected and tolerable deviation rate

Audit sampling is commonly used for which type of audit evidence?

Audit sampling is not used for which type of audit evidence?

The following types of audit evidence can be tested using audit sampling techniques

1. Inspection of tangible assets2. Inspection of records or documents3. Reperformance4. Confirmation