Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
1. Audit sampling implies the gathering of evidence to use as a basis for making valid inferences about the
characteristics of the population as a whole without examining every transaction.
a.
True
b.
False
True
1
AUDT.JOHN.16.123 – Objectives of Audit Sampling
United States – AK – AICPA BB-Critical thinking
2. Audit sampling is the application of an audit procedure to less than 100 percent of the items within an
account balance or class of transactions for the purpose of evaluating some characteristic.
a.
True
b.
False
True
1
AUDT.JOHN.16.123 – Objectives of Audit Sampling
United States – AK – AICPA BB-Critical thinking
3. When performing substantive tests using sampling methods, the auditor’s main concern is the risk of incorrect
rejection.
a.
True
b.
False
False
1
AUDT.JOHN.16.124 – Risks Associated with Sampling
United States – AK – AICPA BB-Critical thinking
4. The risk of incorrect acceptance of an account balance as correct, when in fact it is not correct, bears directly
on the effectiveness of an audit.
a.
True
b.
False
True
1
AUDT.JOHN.16.124 – Risks Associated with Sampling
United States – AK – AICPA BB-Critical thinking
5. The tolerable misstatement is the confidence level needed to infer population values.
a.
True
b.
False
Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
6. Statistical sampling is used when an auditor chooses to examine all purchases of equipment exceeding
$1,000.00 and to test the remaining items by analytical procedures.
a.
True
b.
False
False
1
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
7. The most efficient method of testing a large population is the use of non-statistical sampling.
a.
True
b.
False
False
1
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
8. Statistical sampling assists auditors in determining the sufficiency of evidence gathered.
a.
True
b.
False
True
1
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
9. When testing controls, the use of haphazard selection of a sample allows for random, statistical evaluation.
a.
True
b.
False
False
1
AUDT.JOHN.16.127 – Attribute Sampling
10. The tolerable failure rate is the level at which the control’s failure to operate would cause the auditor to
conclude that the control is not effective and would likely change the auditor’s planned assessment of control
risk in performing tests of account balances..
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
11. The expected population deviation rate is the auditor’s best estimate of the percentage of transactions
processed for which a control is not effectively applied.
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
12. An attribute is defined as a characteristic of the population of interest to the auditor.
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
13. The sample size decreases as the risk of over-reliance decreases.
a.
True
b.
False
False
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
14. For tests of controls, the most commonly used statistical method is attribute sampling.
a.
True
b.
False
True
15. Increasing the expected failure rate will cause the sample size to increase.
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
16. Sample size varies directly with sampling risk.
a.
True
b.
False
False
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
17. Statistical sampling used in control testing eliminates the need for evaluation of errors from a qualitative
perspective.
a.
True
b.
False
False
1
AUDT.JOHN.16.08-04 – LO: 08-04
United States – BUSPORG: Analytic
United States – AK – AICPA BB-Critical thinking
Attribute Sampling
18. The auditor must define the population to which sampling relates if the auditor is to use statistical sampling
for substantive tests of account balances.
a.
True
b.
False
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
19. The individual auditable elements defined by the auditor are the sampling units.
a.
True
b.
False
True
1
AUDT.JOHN.16.123 – Objectives of Audit Sampling
United States – AK – AICPA BB-Critical thinking
20. The most common statistical approaches for substantive testing are classical variables sampling and MUS.
a.
True
b.
False
21. Non-statistical samples should be based on the same audit considerations as those used for statistical
sampling.
a.
True
b.
False
True
1
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
22. Random sampling can be used even if the auditor does not plan on using statistical sampling.
a.
True
b.
False
True
1
AUDT.JOHN.16.08-03 – LO: 08-03
United States – BUSPORG: Analytic
United States – AK – AICPA BB-Critical thinking
Nonstatistical and Statistical Sampling
23. Either nonstatistical or statistical sampling is appropriate for substantive tests of details.
a.
True
United States – AK – AICPA BB-Critical thinking
Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
b.
False
True
1
AUDT.JOHN.16.08-03 – LO: 08-03
United States – BUSPORG: Analytic
United States – AK – AICPA BB-Critical thinking
Nonstatistical and Statistical Sampling
24. Monetary unit sampling (MUS) sampling is designed to test whether there is an acceptable risk of account
balance understatement.
a.
True
b.
False
False
1
AUDT.JOHN.16.128 – MUS
United States – AK – AICPA BB-Critical thinking
25. Monetary unit sampling (MUS) results in an efficient sample size and concentrates on the dollar value of the
account balances.
a.
True
b.
False
True
1
AUDT.JOHN.16.128 – MUS
United States – AK – AICPA BB-Critical thinking
26. Sample size in a MUS sample is a function of risk of incorrect acceptance, tolerable misstatement, and
expected misstatement.
a.
True
b.
False
True
1
AUDT.JOHN.16.128 – MUS
United States – AK – AICPA BB-Critical thinking
27. The population for MUS is defined as the number of dollars in the population being tested.
a.
True
b.
False
True
28. Sampling risk is defined as the risk that an inference drawn from a sample will be incorrect.
a.
True
b.
False
True
1
AUDT.JOHN.16.124 – Risks Associated with Sampling
United States – AK – AICPA BB-Critical thinking
29. Projected misstatements are developed by extrapolation from the misstatements in sample items to the
population.
a.
True
b.
False
30. When evaluating an MUS sample, if the auditor finds no misstatements in the sample, the misstatement
projection is zero dollars, and the total estimated misstatement will equal the projected misstatement for items
in lower-stratum.
a.
True
b.
False
False
1
AUDT.JOHN.16.128 – MUS
United States – AK – AICPA BB-Critical thinking
31. Population items with zero balances have no chance of being selected using PPS sampling.
a.
True
b.
False
True
1
32. Population items with a zero balance have the same chance of being chosen as those with dollar balances
1
AUDT.JOHN.16.128 – MUS
United States – AK – AICPA BB-Critical thinking
Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
when using MUS sampling.
a.
True
b.
False
False
AUDT.JOHN.16.128 – MUS
33. Evaluating statistical sample results is one of the tasks that can be performed by GAS.
a.
True
b.
False
True
1
AUDT.JOHN.16.129 – Using GAS
United States – AK – AICPA BB-Critical thinking
34. The population is a group of items in an account balance that the auditor wants to test.
a.
True
b.
False
True
1
AUDT.JOHN.16.123 – Objectives of Audit Sampling
United States – AK – AICPA BB-Critical thinking
35. Tolerable misstatement is the maximum amount of misstatement the auditor can accept in the population
without requiring an audit adjustment or a qualified audit opinion.
a.
True
b.
False
36. Extracting data from the client’s computer system is one of the tasks that can be performed by GAS.
a.
True
b.
False
37. Statistical sampling combines the theory of probability and statistical inference with audit judgment and
experience.
a.
True
b.
False
True
1
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
38. An example of attribute testing involves obtaining evidence that the client has matched the vendor invoice
details with a purchase order and receiving report before payment approval.
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
39. A sample which exceeds the tolerable rate of deviation results in the auditor’s reliance on internal control
effectiveness.
a.
True
b.
False
False
1
AUDT.JOHN.16.08-04 – LO: 08-04
United States – BUSPORG: Analytic
United States – AK – AICPA BB-Critical thinking
Attributes Sampling
40. Attribute sampling for testing controls should only be done by the auditor at the end of the fiscal period
under audit.
a.
True
b.
False
False
United States – AK – AICPA BB-Critical thinking
41. In analysis of the results of an attribute sampling plan, an auditor may determine that the sample size must
be increased.
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
42. Random number, systematic sampling and material value sampling are acceptable sample selection methods
for statistical sampling.
a.
True
b.
False
False
1
AUDT.JOHN.16.130 – Sample Selection Method
United States – AK – AICPA BB-Critical thinking
43. Random number, haphazard selection and block sampling are acceptable sample selection methods for non-
statistical sampling.
a.
True
b.
False
True
1
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
44. By using Generalized Audit Software (GAS), the auditor can potentially audit the whole population rather
than taking a sample.
a.
True
b.
False
True
1
AUDT.JOHN.16.131 – GAS
45. Using attribute sampling the auditor can test for multiple attributes using the same source documents.
United States – AK – AICPA BB-Critical thinking
Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
46. The audit objective of attribute sampling is to test the correctness of an account balance.
a.
True
b.
False
False
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
47. Stratification of the population into several homogeneous subpopulations generally creates audit efficiency.
a.
True
b.
False
True
1
AUDT.JOHN.16.123 – Objectives of Audit Sampling
United States – AK – AICPA BB-Critical thinking
48. In attribute sampling if the upper limit of the possible deviation rate exceeds the tolerable rate the auditor
can rely upon the control as being effective.
a.
True
b.
False
False
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
49. In MUS sampling basic precision is the upper misstatement limit when no misstatements are detected in a
MUS sample. It is computed by multiplying the sampling interval by the error expansion factor.
a.
True
b.
False
50. In attribute sampling if the selected item cannot be located, the auditor should assume that the control
procedure was not followed and assess that item as a failure.
a.
True
b.
False
True
1
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
51. Which of the following is not considered when obtaining audit evidence through sampling?
a.
The effectiveness of control procedures.
b.
The efficiency of control procedures.
c.
The dollar accuracy of account balances.
d.
The dollar accuracy of classes of transactions.
b
1
AUDT.JOHN.16.123 – Objectives of Audit Sampling
52. For which of the following audit procedure would sampling be most appropriate?
a.
Inquiry
b.
Observation
c.
Confirmation
d.
Analytics
1
AUDT.JOHN.16.08-01 – LO: 08-01
United States – BUSPORG: Analytic
United States – AK – AICPA BB-Critical thinking
Overview of Sampling and GAS
53. Which one of the following is not a decision the auditor makes when using attribute sampling?
a.
Sample size.
b.
Selection of items included in the sample.
c.
Evaluation of sample information.
d.
Whether to document all phases.
United States – AK – AICPA BB-Critical thinking
Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
AUDT.JOHN.16.127 – Attribute Sampling
54. Which one of the following is a decision the auditor makes when using attribute sampling?
a.
The sampling unit.
b.
Period covered by testing.
c.
Completeness of the population.
d.
All of the above are auditor decisions.
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AACSB-Analytical skills
United States – AK – AICPA BB-Critical thinking
55. Which of the following is not considered to be non-sampling risk?
a.
Misinterpretation of information.
b.
Use of improper audit procedure.
c.
The sample does not represent the population.
d.
Carelessness of the auditor.
AUDT.JOHN.16.08-02 – LO: 08-02
United States – BUSPORG: Analytic
United States – AK – AACSB-Analytical skills
United States – AK – AICPA BB-Critical thinking
Objectives of Sampling and Risks Associated with Sampling
56. Which of the following describes sampling risk?
a.
The sample will not contain characteristics representative of the population such that inferences
made about that population will be incorrect.
b.
The population will not contain characteristics representative of the sample such that inferences
made about that sample will be incorrect.
c.
The auditor incorrectly applies sampling methodology.
d.
The sample size will be larger than needed.
57. Which of the following occurs when, based on sample results, control risk is assessed excessively high?
a.
Audit inefficiency.
b.
A less expensive audit.
c.
Reduction of substantive testing.
d.
Errors that are more likely to occur than anticipated.
AUDT.JOHN.16.pling – Risks of Sampling
United States – AK – AICPA BB-Critical thinking
58. Concluding that the book value of inventory is correct when it is materially misstated is an example of
which of the following risks?
a.
Incorrect rejection.
b.
Incorrect acceptance.
c.
Insufficient sample size.
d.
None of the above.
AUDT.JOHN.16.pling – Risks of Sampling
United States – AK – AICPA BB-Critical thinking
59. Incorrect acceptance is directly related to which of the following?
a.
The efficiency of the audit.
b.
The ineffectiveness of the audit.
c.
The cost of the audit.
d.
All of the above.
AUDT.JOHN.16.pling – Risks of Sampling
United States – AK – AICPA BB-Critical thinking
60. When performing sampling, the auditor is most concerned with which of the following?
a.
Risk of incorrect rejection.
b.
Risk of incorrect acceptance.
c.
Risk of excess sample size.
d.
Risk of errors in the population.
United States – AK – AICPA BB-Critical thinking
Objectives of Sampling and Risks Associated with Sampling
Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
AUDT.JOHN.16.pling – Risks of Sampling
61. While auditors may use either statistical or non-statistical sampling, some auditors restrict the use of non-
statistical sampling for what reason?
a.
It is less effective.
b.
It is less objective.
c.
It is less efficient.
d.
It is less risky.
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
62. Which of the following applications are incorporated into statistical sampling?
a.
Binomial and confidence intervals.
b.
Random and haphazard selection.
c.
Hypergeometric distribution with audit risk.
d.
Probability and statistical inference with audit judgment.
AUDT.JOHN.16.126 – Non-statistical vs. Statistical Sampling
United States – AK – AICPA BB-Critical thinking
63. Which one of the following issues need not be addressed when planning an audit sample to test control
procedures?
a.
Audit objective of the test.
b.
Minimum failure rate.
c.
Expected population deviation rate.
d.
Auditor’s allowable risk of assessing control risk too low.
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AACSB-Analytical skills
United States – AK – AICPA BB-Critical thinking
64. Which of the following is the level at which the control’s failure to operate would cause the auditor to
conclude that the control is not effective and would likely change the auditor’s planned assessment of control
Chapter 8 – Specialized Audit Tools: Sampling and Generalized Audit Software
risk in performing tests of account balances?
a.
Tolerable failure rate.
b.
Allowable risk of assessing control risk too low.
c.
Expected failure rate.
d.
Allowance for sampling error.
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
65. Which of the following statistical sampling methods is most commonly used to test control procedures?
a.
Variable sampling.
b.
Ratio estimation sampling.
c.
Attribute sampling.
d.
Dollar unit sampling.
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
66. Which one of the following is not a typical step used to implement an attribute sampling plan?
a.
Define the attributes of interest and what constitutes failure(s).
b.
Select and test the sample items.
c.
Evaluate the sample results.
d.
Define the non-statistical sampling method that is most effective and efficient.
AUDT.JOHN.16.127 – Attribute Sampling
United States – AK – AICPA BB-Critical thinking
67. When performing attribute sampling, which of the following varies directly with the sample size?
a.
The expected failure rate.
b.
The tolerable failure rate.
c.
The risk of overreliance.
d.
The nonsampling risk.