AT.11 Audit Sampling for TOC and STOT Drill

Which of the following is not generally considered in determining sample size for tests of controls?

Choices:

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Expected population exception rate.

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Risk of assessing control risk too low.

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Tolerable exception rate.

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Population size.

Population size.

In testing payroll transactions, an auditor discovers that four out of a statistical sample of one hundred selected time cards were not signed by the appropriate supervisor.  To evaluate the materiality or significance of this control deficiency, the auditor should

Choices:

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Compare the tolerable deviation rate with the expected deviation rate.

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Compute an upper precision limit and compare with the tolerable rate.

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Evaluate the amount of the four time cards in relation to the financial statements.

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Report the deviations and let management assess the significance because they are in the best position to know.

Compute an upper precision limit and compare with the tolerable rate.

Statistical sampling techniques may be used to sample “attributes” as well as “variables”.  An example of a “variable” that can be tested using statistical sampling technique would be:

Choices:

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The number of errors in the client-prepared aging schedule of accounts receivable.

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The balance in the accounts receivable account.

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Compliance with the requirement that each voucher be initialed by the treasurer before a check is prepared for payment of the voucher.

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The number of entries improperly posted to a job order cost card.

The balance in the accounts receivable account.

Assuming the tolerable deviation rate is 5 percent, the expected population rate is 3 percent, and the allowance for sampling risk is 2 percent, what should an auditor conclude if tests of 100 randomly selected documents reveal 4 deviations?

Choices:

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Accept the sample results as support for assessing control risk below the maximum because the tolerable rate less the allowance for sampling risk equals the expected population deviation rate.

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Assess control risk at the maximum because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

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Assess control risk at the maximum because the tolerable rate plus the allowance for sampling risk exceeds the expected population deviation rate.

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Accept the sample results as support for assessing control risk below the maximum because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

Assess control risk at the maximum because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

Which of the following is not an aspect of sampling risk?

Choices:

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Risk of assessing control risk too high

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Risk of not identifying a misstatement included in a sample

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Risk of incorrect acceptance

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Risk of sampling results indicating that a population is materially misstated when it is not

Risk of not identifying a misstatement included in a sample

In performing substantive tests, the auditor is concerned with errors of sampling

The risk of incorrect rejection (Alpha error or Type I error)
The risk of incorrect acceptance (Beta error or Type II error)

Which of the following is true about alpha and beta errors?

Choices:

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The alpha error is of greater concern to the auditor than beta error

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The beta error is of greater concern to the auditor than alpha error

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The alpha error and the beta error are of equal importance to the auditor

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Neither the alpha error nor beta error need be considered by the auditor

The beta error is of greater concern to the auditor than alpha error

Which of the following is true about sampling and nonsampling risks?

Choices:

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Sampling risk can be reduced by increasing the sample size

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Sampling risk cannot be eliminated

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Nonsampling risk can be eliminated by proper engagement planning, supervision and review

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Nonsampling risk arises from the possibility that the auditor’s conclusion, based on a sample may be different from the conclusion reached if the entire population were subjected to the same audit procedure

Sampling risk can be reduced by increasing the sample size

Some conditions leading to a larger sample size in substantive testing:

- Reliance on internal control

1.1 higher reliance
1.2 lower reliance

- Reliance on other substantive tests related or same audit objectives as class of transactions

2.1 higher reliance
2.2 lower reliance

- Measure of tolerable errors for a specific audit objective

3.1 larger measure
3.2 smaller measure

- Expected size and frequency of errors

4.1 larger errors or higher frequency
4.2 smaller errors or lower frequency

Choices:

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Combination of 1.2, 2.2, 3.2, 4.1

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Combination of 1.1, 2.1, 3.2, 4.1

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Combination of 1.2, 2.2, 3.1, 4.2

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Combination of  1.1, 2.1, 3.1, 4.2

Combination of 1.2, 2.2, 3.2, 4.1

Statistical sampling provides a technique for

Choices:

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Exactly defining materiality.

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Greatly reducing the amount of substantive testing.

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Eliminating judgment in testing.

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Measuring the sufficiency of evidential matter.

Measuring the sufficiency of evidential matter.

In examining cash disbursements, an auditor plans to choose a sample using systematic selection with a random start. The primary advantage of such a systematic selection is that population items

Choices:

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That include irregularities will not be overlooked when the auditor exercises compatible reciprocal options.

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May occur in a systematic pattern, thus making the sample more representative.

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May occur more than once in a sample.

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Do not have to be prenumbered in order for the auditor to use the technique.

Do not have to be prenumbered in order for the auditor to use the technique.

Which of the following would be an example of sampling error?

Choices:

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The auditor chose a random sample, calculated a sample error rate of 4%, and concluded that the population error rate was 4%. The true population error rate was 6%.

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The auditor selected a non-random sample and generalized the sample results to the population using statistical methods.

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The auditor chose a non-random sample to focus on transactions for only 2 months of the year.

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The auditor chose a random sample and divided the number of errors in the sample by the number of accounts in the sample to calculate the sample error rate.

The auditor chose a random sample, calculated a sample error rate of 4%, and concluded that the population error rate was 4%. The true population error rate was 6%.

When the auditor goes through a population and selects items for the sample without regard to their size, source, or other distinguishing characteristics, it is called:

Choices:

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Block sample selection.

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Haphazard selection.

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Systematic sample selection.

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Statistical selection.

Haphazard selection.

How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details?

	Increase in tolerable misstatement	Increase in assessed level of control risk
I.	Increase sample size	Increase sample size
II.	Increase sample size	Decrease sample size
III.	Decrease sample size	Increase sample size
IV.	Decrease sample size	Decrease sample size

Choices:

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Choice I

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Choice II

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Choice III

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Choice IV

Choice III

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

Choices:

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

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

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As the population size doubles, the sample size also should double.

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A large sample size should be selected as the expected control deviation decreases.

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

The expected population deviation rate of client billing errors is 3%. The auditor has established a tolerable rate of 5%. In the review of client invoices the auditor should use

Choices:

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Stratified sampling.

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Variable sampling.

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Discovery sampling.

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Attribute sampling.

Attribute sampling.