Auditing and Assurance Services, 16e (Arens/Elder/Beasley)
Chapter 15 Audit Sampling for Tests of Controls and Substantive Tests of Transactions
15.1 Learning Objective 15-1
1) A sample in which the characteristics of the sample are the same as those of the population is
a(n)
A) variables sample.
B) representative sample.
C) attributes sample.
D) random sample.
2) When the auditor decides to select less than 100 percent of the population for testing, the
auditor is said to use
A) audit sampling.
B) representative sampling.
C) poor judgment.
D) estimation sampling.
3) To determine if a sample is truly representative of the population, an auditor would be
required to
A) conduct multiple samples of the same population.
B) never use sampling because of the expense involved.
C) audit the entire population.
D) use systematic sample selection.
4) One of the causes of nonsampling risk is
A) choosing the wrong sample size.
B) ineffective audit procedures.
C) inadequate sample size.
D) exceptions being found in the sample.
5) Which one of the choices below is most correct regarding a cause of sampling risk?
A) ineffective use of audit procedures
B) testing less than the entire population
C) use of extensive tests of controls
D) use of random sampling
6) An auditor can increase the likelihood that a sample is representative by using care in
A)
Designing the sampling process
Designing the sample selection
Yes
Yes
B)
Designing the sampling process
Designing the sample selection
No
No
C)
Designing the sampling process
Designing the sample selection
Yes
No
D)
Designing the sampling process
Designing the sample selection
No
Yes
7) Which of the following is the risk that audit tests will not uncover existing exceptions in a
sample?
A) sampling risk
B) nonsampling risk
C) audit risk
D) detection risk
8) Which of the following is the risk that an auditor will reach an incorrect conclusion because a
sample is not representative of the population?
A) sampling risk
B) nonsampling risk
C) audit risk
D) detection risk
9) Sampling risk may be controlled by
A)
Adjusting the sample size
Using an appropriate method of
selecting sample items
Yes
Yes
B)
Adjusting the sample size
Using an appropriate method of
selecting sample items
No
No
C)
Adjusting the sample size
Using an appropriate method of
selecting sample items
Yes
No
D)
Adjusting the sample size
Using an appropriate method of
selecting sample items
No
Yes
10) Which of the following statements is most correct?
A) A sample of all items of a population will eliminate sampling risk, but increase nonsampling
risk.
B) The use of an appropriate sample selection technique ensures a representative sample.
C) The auditor’s failure to recognize an exception is a significant cause of sampling risk.
D) The use of inappropriate audit procedures is a significant cause of nonsampling risk.
11) Discuss what is meant by “sampling risk” and “nonsampling risk.”
12) List the two ways auditors can control sampling risk.
13) Discuss two causes of nonsampling risk. Also discuss ways the auditor can control
nonsampling risk.
14) Sampling risk results from the auditor’s failure to recognize exceptions in transaction data.
15) If an auditor does a test in the wrong direction, sampling risk will increase.
16) If a particular internal control is not followed by the client exactly 6% of the time, and the
auditor’s tests of that control find three control violations in a sample of 50, the sample is
considered to be representative.
17) In practice, auditors do not know whether a sample is representative, even after all testing is
complete.
18) One way to control sampling risk is to increase sample size.
19) A sample of all items in a population will have a zero sampling risk.
20) It is virtually impossible to reduce sampling risk to zero.
15.2 Learning Objective 15-2
1) There are three phases in both statistical and nonstatistical sampling. The first phase is to
A) generate random numbers for the sample.
B) evaluate the results.
C) plan the sample.
D) select the sample.
2) Which of the following statements is most correct with concerning the quantification of
sampling risk?
A) Sampling risk cannot be quantified.
B) Sampling risk can be quantified only when nonprobabilistic selection techniques are used to
select the sample.
C) Sampling risk can be quantified only when probabilistic selection techniques are used to
select the sample.
D) None of the above is correct.
3) Which of the following statements is most correct with respect to the evaluation of
nonprobabilistic sample results?
A) It is acceptable to make nonprobabilistic evaluations only when probabilistic sample selection
is used.
B) It is acceptable to make nonprobabilistic evaluations only if the auditor cannot quantify
sampling risk.
C) It is never acceptable to evaluate a nonprobabilistic sample using statistical methods.
D) All of the above are correct.
4) Which of the following is not a phase in the planning of both statistical and nonstatistical
sampling?
A) Plan the sample.
B) Determine the probability that fraud has occurred.
C) Select the sample and perform the tests.
D) Evaluate the results.
5) Which of the following statements is not correct regarding probabilistic and nonprobabilistic
sample selection?
A) In probabilistic selection, every population item has a known chance of being selected.
B) It is acceptable to evaluate a nonprobabilistic sample using statistical methods.
C) Probabilistic selection is required for all statistical sampling methods.
D) Both probabilistic and nonprobabilistic methods are acceptable and commonly used.
6) Which of the following is a correct statement regarding probabilistic versus nonprobabilistic
sample selection?
A) Auditors may make nonstatistical evaluations when using probabilistic sample selection.
B) The AICPA recommends probabilistic sample selection.
C) Nonstatistical sampling can’t provide results that are as effective as a statistical sample.
D) There is only one type of nonprobabilistic sample selection method.
7) An advantage of using statistical sampling techniques is that such techniques
A) quantify sampling risk.
B) eliminate the need for judgmental decisions.
C) define the values of precision and reliability required to provide audit satisfaction.
D) have been established in the courts to be superior to judgmental sampling.
8) Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage
of statistical sampling flows from its ability to
A) quantify sampling risk.
B) promote a more legally defensible procedural approach.
C) define the precision required to provide audit satisfaction.
D) establish conclusive audit evidence with decreased audit effort.
9) Which of the following is an accurate statement regarding sampling?
A) A 95 percent confidence level provides a 5 percent sampling risk.
B) The auditor can perform the audit tests only after the sample items are selected.
C) The purpose of planning the sample is to make sure that the audit tests are performed in a
manner that provides the desired sampling risk and minimizes the likelihood of nonsampling
errors.
D) All of the above are accurate statements.
10) Describe the differences between statistical and nonstatistical sampling in terms of (1) the
sample selection methods used, and (2) quantification of sampling risk.
11) List the three phases in audit sampling for both statistical and nonstatistical sampling.
12) It is equally acceptable under professional auditing standards for auditors to use either
statistical or nonstatistical sampling methods.
13) When using nonstatistical sampling, the sample must be a probabilistic one.
15.3 Learning Objective 15-3
1) A sample in which every possible combination of items in the population has an equal chance
of constituting the sample is a
A) random sample.
B) statistical sample.
C) judgment sample.
D) representative sample.
2) The process which requires the calculation of an interval and then selects the items based on
the size of the interval is
A) statistical sampling.
B) random sample selection.
C) systematic sample selection.
D) computerized sample selection.
3) In systematic sample selection, the population size is divided by the number of sample items
desired in order to determine the
A) sampling interval.
B) tolerable exception rate.
C) computed upper exceptions rate.
D) mean.
4) Which of the following methods of sample selection is appropriately used when selecting a
random sample?
A)
Auditor’s judgmental
selection of items
Use of random number
generators
Generalized audit
software
Yes
No
Yes
B)
Auditor’s judgmental
selection of items
Use of random number
generators
Generalized audit
software
No
Yes
Yes
C)
Auditor’s judgmental
selection of items
Use of random number
generators
Generalized audit
software
Yes
No
No
D)
Auditor’s judgmental
selection of items
Use of random number
generators
Generalized audit
software
No
Yes
No
5) Simple random sampling
A) is used when there is a need to emphasize one or more types of population items.
B) requires both input and output parameters to be set when using a random number generator.
C) is generally used with replacement sampling.
D) is a probabilistic sampling method.
6) When a population is divided into subpopulations, usually by dollar size, and larger samples
are taken from the subpopulation with the larger sizes, ________ is being used.
A) sampling with probability proportional to size
B) stratified sampling
C) block sampling
D) haphazard sampling
7) The advantage of systematic sample selection is that
A) it is easy to use.
B) there is limited possibility of it being biased.
C) it is unnecessary to determine if the population is arranged randomly.
D) it automatically selects items material to the financial statements.
8) In performing a review of a client’s cash disbursements, an auditor uses systematic sample
selection with a random start. The primary disadvantage of this technique is population items
A) may occur twice in the sample.
B) must be reordered in a systematic pattern before the sample can be drawn.
C) may occur in a systematic pattern, thus negating the randomness of the sample.
D) must be replaced in the population after sampling to permit valid statistical inference.
9) Which of the following is a correct statement regarding block sampling?
A) It is acceptable to use block sampling only if a reasonable number of blocks are used.
B) Block sampling uses sampling with replacement.
C) Block sampling is a probabilistic sampling method.
D) There is considerable cost and time involved when block sampling is used.
10) The most serious shortcoming of the haphazard sample selection method is
A) it is not subject to statistical sampling methods.
B) it is time consuming to use.
C) it is costly to use.
D) it is difficult to remain completely unbiased in the selection.
11) Which of the following statements regarding block sampling is least likely to be true?
A) Block sampling is the selection of several items in sequence.
B) It is acceptable to use block sampling for tests of transactions only if a reasonable number of
blocks is used.
C) Only one block should be selected to increase the probability of a representative sample.
D) Once the first item in the block is selected, the remainder of the block is chosen
automatically.
12) When the auditor goes through a population and selects items using nonprobabilistic
selection methods, without regard to their size, source, or other distinguishing characteristics, it
is called
A) block sample selection.
B) haphazard selection.
C) systematic sample selection.
D) statistical selection.
13) When auditors wish to evaluate a sample statistically, an acceptable selection method is:
A) systematic sample selection.
B) judgmental selection.
C) haphazard selection.
D) block sample selection.
14) Which is not a method used by auditors to generate random numbers?
A) electronic spreadsheets
B) systematic sample generators
C) random number generators
D) generalized audit software
15) What is the key advantage and disadvantage associated with systematic sample selection?
How must auditors address this disadvantage?
16) Describe each of the four types of sample selection methods commonly associated with
statistical audit sampling.
17) When selecting a sample, random numbers may be obtained either with replacement or
without replacement. Although both selection methods are theoretically sound, auditors rarely
use replacement sampling.
18) Although systematic sample selection is easy to use, its primary disadvantage is that it is not
a probabilistic sampling method.
19) Nonprobabilistic sampling methods are not based on mathematical probabilities, and
therefore the representativeness of the sample may be difficult to determine.
20) The use of haphazard sample selection is encouraged under professional auditing standards.
21) Directed sample selection, block sample selection, and haphazard sample selection are three
types of probabilistic sample selection methods.
15.4 Learning Objective 15-4
1) Which of the following occurrences would be least likely to warrant further audit attention for
the auditor?
A) deviations from client’s established control procedures
B) deviations from client’s budgeted values
C) monetary misstatements in populations of transaction data
D) monetary misstatements in populations of account balance details
2) Which of the following statements is correct when dealing with sampling for exception rates?
A) The term exception refers to both deviations from the client’s control procedures and amounts
that are not monetarily correct.
B) When used with sampling, the term deviation is synonymous with the term exception.
C) The actual population exception rate is the same as the sample exception rate.
D) In using audit sampling for exception rates, the auditor is most concerned with the confidence
interval.
3) In using audit sampling for exception rates
A) the auditor wants to know the most the exception rate is likely to be.
B) sampling error is the likelihood that the auditor will miss a monetary misstatement.
C) the upper limit of the interval estimate is known as the sampling risk.
D) the computed upper exception rate (CUER) cannot be considered in the context of specific
audit objectives.
4) Which of the following is most correct when using audit sampling for exception rates?
A) The auditor is concerned with the lowest rate.
B) The auditor is concerned with the highest rate.
C) The auditor is concerned with the average on previous audits.
D) The auditor is not concerned with the exception rate for audits of nonpublic companies.
5) The upper limit of the probable population exception rate is the
A) upper exception rate.
B) estimated population exception rate.
C) computed upper exception rate.
D) the tolerable exception rate.
6) You are determining the significance of the following: you set a 5% risk of assessing control
risk too low and your computation of the upper deviation risk is 7%. What could you conclude?
A) There is a 95% chance the deviation rate is the population is less than 5%.
B) There is a 5% chance the deviation rate in the population is less than 7%.
C) There is a 95% chance the deviation rate in the population exceeds 95%.
D) There is a 5% chance the deviation rate in the population exceeds 7%.
7) What types of exceptions are auditors most concerned with when evaluating populations of
accounting data?
8) If the auditor concludes that the computer upper exception rate (CUER) is 5% at an 8%
sampling risk, this means that the exception rate in the population is no greater than 5% with an
8% risk of the exception rate exceeding 5%.
9) The upper limit of the interval estimate is also known as the confidence interval.
10) Deviation refers to a departure from prescribed controls or amounts that are not monetarily
correct.