A. Easier to apply than other statistical sampling approaches.
B. Sample sizes are relatively small.
C. Sample size is influenced by the standard failure of the population.
D. Usually results in a highly efficient sample size.
E. None of the above is an advantage.
85. A major disadvantage of MUS sampling is which of the following?
A. Sample selection is relatively easy.
B. Sample sizes are relatively small.
C. It is difficult to test for understatement.
D. It directly controls for the risk of incorrect acceptance.
86. When the results of sample testing conclude that there is misstatement in excess of the tolerable misstatement the auditor will usually:
A. issue a disclaimer of opinion.
B. throw out the sample.
C. propose adjustments to the client.
D. disclose the misstatement in the client's financial statements.
87. A primary difference in comparing the resulting misstatements analyzed after using statistical methods compared to those using non-statistical methods is that
A. statistical methods determine the most likely misstatement while nonstatistical methods determine misstatements by projecting the misstatement found in the sample back to the population.
B. statistical methods determine misstatements by projecting the misstatement found in the sample back to the population while nonstatistical methods determine the most likely misstatement.
C. statistical methods take a multiple of the estimated misstatement while nonstatistical methods use precision to determine the upper limit.
D. statistical methods ignore any sampling error as the probabilities have compensated for them while nonstatistical methods must utilize the sampling error in the projection of the upper limit.
88. When an auditor uses MUS and analyzes misstatements in the lower stratum, the book value will be compared to the audit results in order to derive the:
A. audit value.
B. tolerable misstatement.
C. sampling interval.
D. tainting percentage.
89. In attribute sampling, the risk of incorrect acceptance deals with A. effectiveness.
B. efficiency.
C. reliability.
D. Both A and B.
90. In attribute sampling, the risk of incorrect rejection deals with A. effectiveness.
B. efficiency.
C. reliability.
D. Both A and B.
91. Non-sampling risk deals with
A. not carrying out the appropriate audit procedure.
B. drawing an incorrect inference from the sample results.
C. inappropriately diagnosing client’s problems.
D. Both A and C.
92. Attribute sampling is used when A. testing rates of deviations of controls.
B. testing the reasonableness of account balances.
C. need to estimate some amount.
D. Both A and B.
93. In sample selection, systematic selection deals with
A. each item in the population having an equal chance of selection.
B. every nth item being selected after a random start.
C. an arbitrary selection with no conscious bias.
D. selecting all items on a day or week.
94. In sample selection, haphazard selection deals with
A. each item in the population having an equal chance of selection.
B. every nth item being selected after a random start.
C. an arbitrary selection with no conscious bias.
D. selecting all items on a day or week.
95. In sample selection, block sampling deals with
A. each item in the population having an equal chance of selection.
B. every nth item being selected after a random start.
C. an arbitrary selection with no conscious bias.
D. selecting all items on a day or week.
96. Sampling risk deals with
A. not carrying out the appropriate audit procedure.
B. drawing an incorrect inference from the sample results.
C. inappropriately diagnosing client’s problems.
D. Both A and C.
97. In testing the reasonableness of account balances, MUS sampling is preferred because it provides a smaller sample size. Which of the following are limitations of using the MUS sampling method?
A. tests for overstatement.
B. zero and negative amounts.
C. numerous misstatements.
D. all of the above.
98. In testing for the reasonableness of an account balance, if MUS sampling cannot be used because of its limitations, what is an alternative statistical method?
A. attribute sampling.
B. mean-per-unit sampling.
C. discovery sampling.
D. all of the above.
99. The upper misstatement limit is computed by adding A. basic Precision
B. most Likely Misstatement
C. incremental Allowance for Sampling Error D. all of the above
100. Which of the following task is not performed by Generalized audit software?
A. Footing a file
B. Evaluating statistical sample results
C. Checking for gaps in processing sequences D. Preparing custom reports
E. All of the above task are performed
101. Dividing the population into relatively homogeneous groups in order to reduce sample size is called A. Ratio estimation.
B. Difference estimation.
C. Stratification.
D. MUS sampling.
102. Sampling factors
List the four important decisions an auditor must make when deciding to use sampling.
103. Nonsampling risk
What is nonsampling risk and how can it be eliminated?
104. Risks of sampling in tests of controls
Define the following terms as they relate to sampling for tests of controls:
1. tolerable failure rate 2. expected failure rate 3. allowance for sampling error.
105. Planning and documentation of sampling use
What are the steps to implement an attribute estimation sampling plan?
106. Encountering misstatements in the sampling process
Explain the term "misstatement" as it applies to sampling during substantive procedures and explain how the term may be interpreted differently by different auditors.
107. Choosing sampling methods
Identify the factors that an auditor would consider when choosing between nonstatistical sampling and statistical sampling.
108. Using MUS sampling
Under what conditions would an auditor choose to use MUS sampling?
109. MUS calculation
Present the formula for the sample interval when using MUS sampling and identify each component of the formula.
110. MUS calculation applied
Given the following information, calculate the sampling interval and the maximum sample size for accounts receivable when there are 550 accounts and a balance of $1,750,000.
Tolerable misstatement $75,000
Expected misstatement $8,000
Error expansion factor 1.0
Reliability factor 2.0
111. MUS sampling interval and sample size
Given the following information, calculate the sampling interval and the maximum sample size for accounts receivable when there are 650 accounts and a balance of $750,000.
Tolerable misstatement $40,000
Expected misstatement $4,000
Error expansion factor 1.0
Reliability factor 2.0
112. Upper Misstatement Limit What is UML and how it is computed?
113. Sample selection
Before procedures using statistical or nonstatistical sampling methods begin, the auditor must determine how the sample will be selected. Discuss the various types of sample selection, when they are used and, generally, how they are used. Give examples.
114. Nonstatistical sampling
Describe nonstatistical sampling and how it is used by the auditor.