Chapter 6 Audit Sampling

1. In designing audit procedures, the auditor is required to determine appropriate means of selecting
items for testing to gather audit evidence. Which of the following is/are available to the auditor?
I. Selecting all items (100% examination).
II. Selecting specific items.
III. Audit sampling.

a. I and II only
b. III only
c. I and III only
d. I, II, and III

2. Which of the following should be considered by the auditor in deciding which means (or
combination of means) to use in selecting items for testing?
I. The risk of material misstatement related to the assertion being tested.
II. Audit efficiency

a. I only
b. II only
c. Both I and II
d. Neither I nor II

3. It will be appropriate to audit all the items that make up a class of transactions or account balance
(100% examination), except
a. When the class of transactions or account balance consists of a large number of small
value items.
b. When the class of transactions or account balance consists of a small number of large value
items.
c. When there is a significant risk of misstatement and other selection methods do not provide
sufficient appropriate audit evidence.
d. When the repetitive nature of a calculation or other process performed automatically by the
client’s computer informative system (CIS) makes a 100% examination cost effective.

4. PSA 500 states that the auditor may decide to select specific items from a population based on such
factors as the auditor’s understanding of the entity, the assessed risk of materials misstatement, and
the characteristics of the population being tested. Specific items that may be selected for testing
usually include the following except
a. Items that are of high value.
b. Items that are suspicious, unusual, risk-prone, or have a history of error.
c. All items whose values do not exceed a certain amount so as to verify only a small
proportion of the total amount of class of transactions or account balance.
d. Items that provide information about matters such as the nature of the entity, the nature of
transactions, and internal control.

5. Audit sampling involves the

a. Selection of all items over a certain amount.
b. Application of audit procedures to less than 100% of items within a class of transactions
or account balance such that all items have a chance of selection.
 c. Application of audit procedures to all items that comprise a class of transactions or account
balance.
d. Application of audit procedures to all items over a certain amount and those that are unusual or
have a history of error.

6. Population, as defined in PSA 530 (Audit Sampling), means that entire set of data from which a
sample is selected and about which the auditor wishes to draw conclusions. It is important for the
auditor to ensure that the population is
I. Appropriate to the objective of the audit procedure.
II. Complete.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

7. The two general approaches to audit sampling are:

a. Stratification and value weighted.
b. Random and nonrandom.
c. Statistical and nonstatistical.
d. Precision and reliability

8. The principal methods of selecting samples are the use of

I. Random number tables or CAATs.
II. Systematic selection.
III. Haphazard selection.

a. I and II only
b. II and III only
c. I and III only
d. I, II and III

9. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps
an auditor to
a. Minimize the failure to detect errors and fraud.
b. Measure the sufficiency of the evidential matter obtained.
c. Eliminate the risk on nonsampling errors.
d. Reduce the level of audit risk and materiality to a relatively low amount.

10. The likelihood of assessing control risk too high is the risk that the sample selected to test controls
a. Does not support the tolerable error for some or all of management’s assertions.
b. Contains proportionately fewer deviations from prescribed internal controls that exist in the
balance or class as a whole.
c. Does not support the auditor’s planned assessed level of control risk when the true
operating effectiveness of internal control justifies such an assessment.
d. Contains misstatements that could be material to the financial statements when aggregated with
misstatements in other account balances of transaction classes.

11. While performing a test of details during an audit, the auditor determined that the sample results
supported the conclusion that the recorded account balance was materially misstated. It was, in fact,
not materially misstated. This situation illustrates the risk of
 a. Assessing control risk too low
b. Assessing control risk too high
c. Incorrect acceptance
d. Incorrect rejection

12. The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the
a. Effectiveness of the audit
b. Efficiency of the audit
c. Tolerable misstatement
d. Preliminary estimate of materiality levels

13. Which of the following statements is true?

a. Statistical sampling is more convenient to use that non-statistical sampling.
b. Statistical sampling aids the auditor in evaluating results.
c. Statistical sampling requires the auditor to make fewer judgmental decisions.
d. Statistical sampling will be looked upon by the courts as providing superior audit evidence.

14. The following are examples of nonsampling risk, except

a. Failure to recognize an error
b. Obtaining an unprecedented sample.
c. Use of audit procedure inappropriate to achieve a given objective.
d. Failing to evaluate results properly.

15. The following are advantages of using statistical sampling, except

a. Statistical sampling provides a means for mathematically measuring the degree of risk that
results from examining only a part of a population.
b. Statistical sampling allows the auditor to greatly reduce substantive testing.
c. Statistical sampling allows the auditor to measure the sufficiency of the evidential matter
obtained.
d. Statistical sampling aids in the design of an effective sample.

16. Which of the following methods is most appropriate when performing tests of controls?
a. Stratified random sampling
b. Unrestricted random sampling with replacement
c. Variable sampling
d. Attribute sampling

17. In the audit of inventory, attribute sampling may be applied to estimate the
a. Average price of inventory items
b. Physical quantity of inventory items
c. Percentage of slow-moving inventory items
d. Peso value of inventory

18. The risk that the assessed level of control risk based on the sample is less than the true operating
effectiveness of the control policy or procedure is the risk of
a. Assessing control risk too low
b. Assessing control risk too high
c. Incorrect acceptance
d. Incorrect rejection

19. An element of sampling risk is

 a. Choosing a sample size that is too small to achieve the sampling objective.
b. Choosing an audit procedure that is inconsistent with the audit objective.
c. Failing to perform audit procedures that are required by the sampling plan.
d. Failing to detect a deviation on a document inspected by the auditor.

20. Statistical sampling provides a technique for

a. Exactly defining materiality.
b. Greatly reducing the extent of substantive testing.
c. Eliminating judgment testing.
d. Measuring the sufficiency of evidential matter.

21. The distinguishing feature of statistical sampling is that it

a. Reduces the problems associated with the auditor’s judgment concerning materiality.
b. Requires the examination of a smaller number of supporting documents.
c. Is evaluated in terms of two parameters: statistical mean and random selection.
d. Provides a means for measuring mathematically the degree of uncertainty that results
from examining only part of a population.

22. Which of the following is true if certain forms are not consecutively numbered?
a. Systematic sampling may be appropriate.
b. Selection of a random sample probably is not possible.
c. Random number tables cannot be used.
d. Stratified sampling should be used.

23. In examining cash disbursements, an auditor plans to choose a sample using systematic selection
with a random start. The primary advantage of this selection technique is that population items
a. May occur more than once in the sample.
b. May occur in a systematic pattern, thus making the sample more representative.
c. That are indicative of fraud will be included in the sample.
d. Do not have to be prenumbered in order for the auditor to use the technique.

24. In attribute sampling, a 5% change in which of the following factors normally will have the least
effect on the size of a statistical sample?
a. Expected deviation rate.
b. Risk of assessing control risk too low.
c. Population size.
d. Tolerable deviation rate.

25. Given random selection, the same sample size, and the same tolerable deviation rate for the testing
of the two unequal populations, the risk of assessing control risk too low for the larger population is
a. Higher than the risk of assessing control risk too low for the smaller population.
b. Lower than the risk of assessing control risk too low for the smaller population.
c. The same as the risk of assessing control risk too low for the smaller population.
d. Indeterminable relative to the risk of assessing control risk too low for the smaller population.

26. If the size of the sample to be used in a particular test of attributes has not been determined by
utilizing statistical concepts, but the sample has been randomly chosen
a. The auditor will have to evaluate the results by reference to the principles of discovery
sampling.
b. May not use statistical evaluation.
c. The auditor has committed a nonsampling error.
 d. No inferences can be drawn from the sample.

27. In determining the number of items to be selected in a sample for a particular substantive test of
details, the auditor should consider all of the following, except
a. Tolerable misstatements.
b. Characteristic of the population.
c. Deviation rate
d. Allowable risk of incorrect acceptance

28. Which of the following statements best describes the concept of sampling risk?
a. A randomly chosen sample may not be representative of the population as a whole on the
characteristic of interest.
b. The document related to the chosen sample may not be available for inspection.
c. An auditor may fail to recognize errors in the documents examined for the chosen sample.
d. An auditor may select audit procedures that are not appropriate to achieve the specific
objective.

29. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too
high relate to the
a. Effectiveness of the audit.
b. Efficiency of the audit.
c. Audit quality controls.
d. Selection of the sample.

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

a. Item must be systematically selected using replacement.
b. Item in the accounting population should have an opportunity to be selected.
c. Stratum of the accounting population be given equal representation in the sample.
d. Items in the accounting population be randomly ordered.

31. If certain forms are not consecutively numbered

a. Selection of a random sample probably is not possible.
b. Systematic sampling may be appropriate.
c. Random number tables cannot be used.
d. Stratified sampling should be used.

32. When performing a test of a control with respect to control over cash receipts, an auditor may use a
systematic sampling technique, with a start at any randomly selected item. The biggest
disadvantage of this type of sampling is that the items in the population
a. Must be systematically replaced in the population after sampling.
b. Must be recorded in a systematic pattern before the sample can be drawn.
c. May occur in a systematic pattern, thus destroying the sample randomness.
d. May systematically occur more than once in the sample.

33. For which of the following audit tests would an auditor most likely use attribute sampling?
a. Selecting accounts receivable for confirmation of account balances.
b. Examining invoices in support of the valuation of property, plant and equipment additions.
c. Making an independent estimate of the amount of FIFO inventory.
d. Inspecting employee time cards for proper approval by the supervisors.
34. Which of the following sampling methods would be used to estimate a numerical measurement of a
population, such as a peso value?
a. Variable sampling
b. Attribute sampling
c. Random-number sampling
d. Stop-or-go sampling

35. Which of the following factors is usually not considered in determining the sample size for a test of
controls?
a. Expected population deviation rate
b. Risk of assessing control risk too low
c. Tolerable deviation rate
d. Population size, when the population is large

36. The sample size of a test of controls varies inversely with

Tolerable Expected
Deviation Rate (TDR) Deviation Rate (EDR)

a. No No
b. Yes Yes
c. No Yes
d. Yes No

37. In planning a statistical sample for a test of controls, an auditor increased the expected population
deviation rate (EDR) from prior year’s rate because of the results of the prior year’s test of controls
and the overall control environment. The auditor most likely would then increase the planned
a. Risk of assessing control risk too low
b. Sample size
c. Allowance for sampling risk
d. Tolerable deviation rate

38. Which of the following factors does an auditor usually need to consider in planning a particular
audit sample for a test of controls?
a. Acceptable level of risk of assessing control risk too low
b. Tolerable misstatement
c. Number of sampling units in the population
d. Total peso amount of the items to be sampled

39. Which of the following statements is true concerning statistical sampling in tests of controls?
a. For a given tolerable rate, a larger sample size should be selected as the expected population
deviation rate decreases.
b. As the population size doubles, the sample size also should double.
c. The expected population deviation rate has little or no effect on determining sample size except
for very small populations
d. The population size has little or no effect on determining sample size except for very small
populations.

40. Which of the following statements is correct concerning statistical sampling in tests of controls?
a. In determining the tolerable rate, an auditor considers detection risk and the sample size.
b. Deviations from specific control activities at a given rate ordinarily result in
misstatements at a lower rate.
 c. As the population size increases, the sample size should increase proportionately.
d. There is an inverse relationship between the expected population deviation rate and the sample
size.

41. Audit efficiency may be improved when the sampling unit is defined as the individual monetary
units that comprise the population. This technique is called
a. Stratification
b. Random Selection
c. Systematic selection
d. Value-weighted selection

42. Which of the following statements relating to stratification is incorrect?

a. When performing tests of details of transactions and account balances, the population is often
stratified by monetary value.
b. The results of audit procedures applied to a sample of items within a stratum can be
projected to the entire population.
c. When verifying the valuation assertion for accounts receivable, account balances may be
stratified by age.
d. Stratification reduces the variability of items within each stratum.

43. In audit sampling, ___________ involves dividing the population into discrete sub-populations
which have an identifying characteristic.
a. Value-weighted selection
b. Stratification
c. Random selection
d. Block selection

44. In systematic selection, the number of sampling units in the population is divided by the sample
size to determine the
a. Sampling interval
b. Pattern that may exist in the population
c. Sampling risk
d. Nonsampling risk

45. Which of the following sample selection methods cannot ordinarily be used in audit sampling?
a. Value-weighted selection
b. Random selection
c. Block selection
d. Systematic selection

46. Which of the following sample selection methods is not appropriate when using statistical
sampling?
a. Random Selection
b. Systematic selection
c. Monetary unit sampling
d. Haphazard selection

47. A number of factors influence the sample size for a substantive test of details of an account balance.
All other factors being equal, which of the following would lead to a larger sample size?
a. Smaller measure of tolerable misstatement
b. Smaller expected frequency of errors
 c. Greater reliance on analytical procedures
d. Greater reliance on internal control

48. An auditor may decide to increase the risk of incorrect rejection when
a. The cost and effort of selecting additional sample items are low
b. Increased reliability from the sample is desired
c. Many differences (audit value minus recorded value) are expected
d. Initial sample results do not support the planned level of control risk

49. In applying variables sampling, an auditor attempts to

a. Predict a monetary population value within a range of precision
b. Estimate a qualitative characteristic of interest
c. Determine various rates of occurrence for specified attributes
d. Discover at least one instance of a critical deviation

50. In evaluating an attribute sample, the estimated range that is expected to contain the population
characteristics is the
a. Confidence level
b. Expected deviation rate
c. Precision
d. Upper deviation limit

51. An error that arises from an isolated event that has not recurred other than on specifically
identifiable occasions and is therefore not representative of similar errors in the population is an
a. Anomalous error
b. Isolated error
c. Scandalous error
d. Non-recurring error

52. An attribute sampling plan may be used to test the effectiveness of controls. The auditor's
evaluation of the sampling results ordinarily leads to a conclusion concerning
a. The relation of the population deviation rate to the tolerable rate.
b. Monetary precision exceeding a certain predetermined amount.
c. The population value not being misstated by more than a predetermined amount.
d. Population characteristics occurring at least once in the population

53. When planning a sample for a substantive test of details, an auditor should consider tolerable
misstatements for the sample. This consideration should
a. Not be changed during the audit process.
b. Be related to the auditor's business risk.
c. Be related to preliminary judgment about materiality levels.
d. Not be adjusted for qualitative factors.

54. In estimation sampling for variables, which of the following must be known to estimate the
appropriate sample size required to meet the auditor's needs in a given situation?
a. The estimated deviation rate in the population.
b. The qualitative aspects of misstatements.
c. The estimated population value.
d. The acceptable level of risk.