Chapter 09 - Audit Sampling
Chapter 09
Audit Sampling
True / False Questions
1. Stratification of the population generally results in a more efficient sampling plan.
True False
2. Discovery sampling is equivalent to an attributes sampling plan with a specified expected
deviation rate of 0 percent.
True False
3. Increases in the number of deviations in an attributes sample results in an increase in the
achieved upper deviation rate of the attributes sample.
True False
4. The definition of a "deviation" for a test of a control should include only those deviations
that result in misstatements in the financial statements.
True False
5. Statistical sampling cannot be used to test all control activities.
True False
6. Using ratio and difference estimation for a sample is an example of a dual purpose test.
True False
7. Increases in the tolerable misstatement result in a decreased sample size when using meanper-unit estimation.
True False
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Chapter 09 - Audit Sampling
8. The mean book value of the items included in a mean-per-unit sample is not directly used
in the evaluation of sample results.
True False
9. When evaluating the results of a variables sampling plan, the projected misstatement is
calculated and compared to the tolerable misstatement.
True False
10. Auditors project the misstatements found in the sample to the population when using
statistical sampling, but not when using nonstatistical sampling.
True False
Multiple Choice Questions
The 10,000 accounts receivable of DEF Company have a total book value of $120,000. A
CPA has selected and audited a sample of 100 accounts with a total book value of $1,000 and
an audited value of $1,200.
11. Using the difference estimation technique, estimated total audited value of the population
is:
A. $100,000.
B. $120,000.
C. $140,000.
D. $144,000
12. Using the ratio estimation technique, the estimated total audited value of the population
is:
A. $100,000.
B. $120,000.
C. $140,000.
D. $144,000
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Chapter 09 - Audit Sampling
13. Using the mean-per-unit estimation technique, the estimated total audited value of the
population is:
A. $100,000.
B. $120,000.
C. $140,000.
D. $144,000.
14. Using the mean-per-unit estimation method an auditor has properly calculated the
estimated total audited value of a population as $200,000. Her sample included 200 of the
population's 40,000 items. She found that, in her sample the average audited value was $1 less
than the average book value. What was the average audited value in the sample?
A. $4.
B. $5.
C. $6.
D. $10.
15. Using difference estimation, an auditor has taken a sample of 200 from a population's
40,000 items; that population has a book value of $200,000. She found that in her sample the
average audited value was $4.20, while the average book value was $5.20. What is the
estimated total audited value of the population?
A. $160,000.
B. $161,538.
C. $168,000.
D. $200,000.
16. Using ratio estimation, an auditor has taken a sample of 200 from a population's 40,000
items; that population has a book value of $200,000. She found that in her sample the average
audited value was $4.20, while the average book value was $5.20. What is the estimated total
audited value of the population?
A. $160,000.
B. $161,538.
C. $168,000.
D. $200,000.
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Chapter 09 - Audit Sampling
17. Using mean-per-unit estimation, an auditor has taken a sample of 200 from a population's
40,000 items; that population has a book value of $200,000. She found that in her sample the
average audited value was $4.20, while the average book value was $5.20. What is the
estimated total audited value of the population?
A. $160,000.
B. $161,538.
C. $168,000.
D. $200,000.
18. If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable
misstatement is $9,000, what would an auditor likely conclude?
A. Since the projected misstatement is less than the tolerable misstatement, the account is not
misstated.
B. Since the projected misstatement is less than the tolerable misstatement, the account is
misstated.
C. The risk is high that the account is materially misstated.
D. The analysis has been improperly performed since the projected misstatement is unequal to
the tolerable misstatement.
19. A dual purpose test simultaneously.
A. Addresses two different accounts.
B. Functions as a substantive test and as a test of controls.
C. Functions as an analytical procedure and a substantive test.
D. Substantiates an ending balance and the transactions making up the balance.
The 1000 accounts receivable of Winco Company have a total book value of $20,000
(Average book value = $20). Bob Duffo, CPA, has selected and audited a sample of 50
accounts with the following mean values:
1. Book value of $19.
2. Audited value of $19.60.
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Chapter 09 - Audit Sampling
20. What is the estimated total audited value using mean per unit sampling?
A. $19,000.
B. $19,600.
C. $20,000.
D. $20,632.
21. What is the estimated total audited value using difference estimation sampling?
A. $19,387.
B. $19,400.
C. $19,600.
D. $20,600.
22. If all other factors specified in an attributes sampling plan remain constant, decreasing the
tolerable rate and decreasing the risk of assessing control risk too low would have what effect
on sample size?
A. Increase.
B. Remain the same.
C. Decrease.
D. Indeterminate, depends upon exact change being made.
23. If all other factors specified in an attributes sampling plan remain constant, decreasing the
tolerable rate and increasing the estimated population deviation rate would have what effect
on sample size?
A. Increase.
B. Remain the same.
C. Decrease.
D. Indeterminate, depends upon exact change being made.
24. An increase in the tolerable misstatement has what effect on the planned allowance for
sampling risk?
A. Increases.
B. Decreases.
C. No effect.
D. Indeterminate.
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Chapter 09 - Audit Sampling
25. Which of the following is not generally used for selecting samples?
A. Random number tables.
B. Random number generators.
C. Physical representation numbers.
D. Systematic selection.
26. In performing a test of a control last year the auditors specified a tolerable deviation rate
of X percent. This year the auditors have specified a tolerable rate of less than X percent.
Assuming that all other factors remain the same, which of the following is true regarding the
relationship between this year's sample size compared to last year's sample size?
A. This year's sample is larger than last year's sample.
B. This year's sample is smaller than last year's sample.
C. This year's sample is equal to last year's sample.
D. This year's sample is indeterminate in relation to last year's sample.
27. The auditor using nonstatistical attributes sampling, but who nevertheless has chosen the
sample in conformity with random selection procedures:
A. Need not consider the risk of assessing control risk too low.
B. Has committed a nonsampling error.
C. Will have to use discovery sampling techniques to evaluate the results.
D. Should compare the deviation rate of the sample to the tolerable rate.
28. When performing tests of controls over authorization of cash receipts, which of the
following sampling methods would be most appropriate?
A. Attributes.
B. Ratio.
C. Stratified.
D. Variables.
29. Which of the following statistical sampling techniques involves taking samples in a series
of stages?
A. Systematic sampling.
B. Sequential sampling.
C. Continuous sampling.
D. Multiple location sampling.
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Chapter 09 - Audit Sampling
30. Which of the following is generally not true about statistical sampling as compared to
nonstatistical sampling?
A. Statistical samples are more representative of the population.
B. Statistical sample plans involve additional costs of evaluation.
C. Statistical sampling allows a more objective evaluation of sample results.
D. Statistical sampling may assist the auditors in designing more efficient samples.
31. When using statistical sampling, which of the following need not be known to evaluate
the results of an attributes sample?
A. Sample size.
B. Risk of assessing control risk too low.
C. Number of deviations in the population.
D. Number of deviations found in the sample.
32. When the auditors have decided to use statistical rather than nonstatistical sampling, a
disadvantage is that:
A. Designing efficient samples is more difficult.
B. The costs of training staff may be higher.
C. Sampling without replacement must be used.
D. Objectively evaluating results is impossible.
33. Changing from a sampling plan using random selection with replacement to random
selection without replacement has what effect on the required sample size?
A. Increases.
B. Decreases
C. No effect.
D. An indeterminate effect.
34. When the auditors have chosen to test a control, what relationship will the tolerable rate
normally have when compared to the expected rate of deviations in the sample?
A. Exceed.
B. Equal.
C. Be less than.
D. Indefinite.
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Chapter 09 - Audit Sampling
35. Increases in the planned allowance for sampling risk have what effect on required sample
size?
A. Increases.
B. Decreases.
C. No effect.
D. Indeterminate.
36. When using sampling for tests of controls, which of the following audit consequences
may follow?
A. If sample results indicate that the control is operating effectively, but in fact it is not,
control risk will be assessed too low.
B. If sample results indicate that the control is operating effectively, but in fact it is not,
control risk will be assessed too high.
C. If sample results indicate that the control is not operating effectively, but in fact it is
operating effectively, the audit is likely to be faulty because of reduced substantive tests.
D. If sample results indicate that the control is not operating effectively, but in fact it is
operating effectively, control risk will be assessed too low.
37. The auditors expect a population deviation rate of billing errors of two percent, and have
established a tolerable rate of five percent. The sampling approach most likely to be used is:
A. Attributes sampling.
B. Stratified sequential sampling.
C. Discovery sampling.
D. None, as sampling does not seem appropriate in this situation.
38. The auditors expect a population deviation rate of billing errors of eight percent, and have
established a tolerable rate of five percent. The sampling approach most likely to be used is:
A. Attributes sampling.
B. Stratified random sampling.
C. Variables sampling.
D. None, as sampling does not seem appropriate in this situation.
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Chapter 09 - Audit Sampling
39. Which of the following may be used to reduce the risk of nonsampling errors?
A. Increasing the size of audit samples.
B. Stratifying audit samples.
C. Adequately planning audit samples.
D. Using statistical sampling techniques.
40. Which of the following types of risk is of critical importance to auditors in performing
tests of controls?
A. The risk of assessing control risk too low.
B. The risk of assessing control risk too high.
C. The risk of incorrect acceptance.
D. The risk of incorrect rejection.
41. The auditors' failure to recognize a misstatement in an amount or a deviation in an internal
control data processing procedure is described as a:
A. Statistical error.
B. Sampling misstatement.
C. Standard error of the mean.
D. Nonsampling error.
42. What effect does obtaining a sample with a standard deviation larger than that estimated
during planning have on the adjusted allowance for sampling risk?
A. Increases.
B. Decreases.
C. No effect.
D. Indeterminate.
The 2000 accounts receivable of ABC Company have a total book value of $40,000. Bob
Rotter, CPA, has selected and audited a sample of 100 accounts with a total book value of
$1,950. The audited value of the 100 accounts in the sample is $1,875.
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Chapter 09 - Audit Sampling
43. Using the mean-per-unit estimation technique, Rotter's estimate (to the nearest dollar) of
year-end accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
44. Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of year-end
accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
45. Using the difference estimation technique, Rotter's estimate (to the nearest dollar) of yearend accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
46. The 3000 accounts receivable of DEF Company have a total book value of $60,000. Bob
Smith, CPA, has selected and audited a sample of 100 accounts with a total book value of
$2,100. Using the difference estimation technique, Smith has properly estimated a projected
misstatement of an overstatement of $6,000 for the entire population. The audited value of
Smith's sample is:
A. $1,700
B. $1,800
C. $1,900
D. $2,300
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Chapter 09 - Audit Sampling
47. The 3000 accounts receivable of DEF Company have a total book value of $60,000. Bob
Smith, CPA, has selected and audited a sample of 100 accounts with a total book value of
$2,100. Using the difference estimation technique, Smith has properly estimated a projected
misstatement of a $9,000 overstatement for the entire population. The estimated total audited
value of the population is:
A. $51,000
B. $58,000
C. $60,000
D. $69,000
48. The 4000 accounts receivable of GHI Company have a total book value of $60,000. Bob
Smith, CPA, has selected and audited a sample of 100 accounts with a total book value of
$1,600. Using the mean-per-unit estimation technique, Smith has properly estimated a
projected misstatement of a $8,000 overstatement for the entire population. The audited value
of Smith's sample is:
A. $1,300
B. $1,400
C. $1,600
D. $1,800
49. Which of the following is a correct statement with respect to evaluating results when
using nonstatistical sampling for substantive tests?
A. When the projected misstatement exceeds the tolerable misstatement, the auditor should
conclude that the population is not misstated.
B. The closer the projected misstatement is to the tolerable misstatement, the higher the risk
of material misstatement.
C. When the projected misstatement is equal to zero, the auditors may conclude with certainty
that no misstatements exist in the account.
D. When the projected misstatement percentage exceeds the risk of incorrect acceptance the
auditors will generally conclude that the population is materially misstated.
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Chapter 09 - Audit Sampling
50. Assume a mean-per-unit estimation variables sampling application with a tolerable
misstatement of $70,000 and a book value of $700,000. After performing the sampling plan,
the auditors calculated an adjusted allowance for sampling risk of $45,000 and a point
estimate of the population's total audited value to be $650,000. Based on these results, the
auditor would:
A. Because the tolerable misstatement exceeds the adjusted allowance for sampling risk,
conclude that the population does not contain a material misstatement.
B. Because the total audited value  tolerable misstatement includes the book value, conclude
that the population does not contain a material misstatement.
C. Because the tolerable misstatement exceeds the adjusted allowance for sampling risk,
conclude that there is too great a risk that the account balance is materially misstated.
D. Because the total audited value  adjusted allowance for sampling risk does not include the
book value, conclude that there is too great a risk that the account balance is materially
misstated.
51. Assume a mean-per-unit estimation variables sampling application with a tolerable
misstatement of $70,000 and a book value of $700,000. After performing the sampling plan,
the auditors calculated an adjusted allowance for sampling risk of $45,000 and a point
estimate of the population's total audited value to be $640,000. The projected misstatement
based on this sample is:
A. $ 5,000
B. $45,000
C. $60,000
D. $70,000
52. The auditors have audited a sample with a standard deviation of audited values larger than
they had originally estimated. In this situation, to maintain the risk of incorrect acceptance at
its predetermined level without increasing the size of the sample, which of the following
statements is correct?
A. The adjusted allowance for sampling risk will be smaller than had been planned.
B. The adjusted allowance for sampling risk will be larger than had been planned.
C. The risk of incorrect rejection will necessarily decrease.
D. The size of the population must be decreased.
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Chapter 09 - Audit Sampling
53. In the past, the auditors have found that the book value of a receivable account has been
related to the amount the account is misstated (i.e., large accounts have large misstatements
and small accounts have small misstatements). Which of the following techniques is most
likely to be efficient?
A. Mean-per-unit estimation.
B. Ratio estimation.
C. Difference estimation.
D. Sequential sampling estimation.
54. Which of the following statements is correct concerning the use of nonstatistical sampling
for substantive tests?
A. Its use is generally acceptable only for populations with an immaterial book value.
B. It requires the use of structured sample size selection techniques to be acceptable.
C. It may be especially useful in circumstances in which the combination of inherent and
control risk is at the maximum level.
D. Results will be projected to the population.
55. Which of the following situations will result in the auditors concluding that the risk of
material misstatement is too high when using nonstatistical sampling for substantive tests?
A. The projected misstatement exceeds the tolerable misstatement.
B. The allowance for sampling risk exceeds the projected misstatement.
C. The risk of incorrect acceptance exceeds the risk of incorrect rejection.
D. The tolerable misstatement exceeds the sample net misstatement.
56. During the final planning of the accounts receivable program a CPA specified a tolerable
misstatement of $30,000, instead of the $20,000 contained in the preliminary audit program.
What would be the impact of this change?
A. A decrease in population standard deviation.
B. An increase in sample standard deviation.
C. An increase in required sample size.
D. A decrease in the required sample size.
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Chapter 09 - Audit Sampling
57. Which of the following is an advantage of systematic selection over random number
selection?
A. It provides a stronger basis for statistical conclusions.
B. It enables the auditor to use the more efficient "sampling with replacement" tables.
C. There may be correlation between the location of items in the population, the feature of
sampling interest, and the sampling interval.
D. It does not require establishment of correspondence between random numbers and items in
the population.
58. Statistical sampling generally may be applied to test internal control when the client's
internal control procedures:
A. Depend primarily on appropriate segregation of duties.
B. Are carefully reduced to writing and are included in client accounting manuals.
C. Leave an audit trail in the form of evidence of compliance.
D. Enable the detection of material fraud in the accounting records.
59. Which of the following statements is correct about the sample size in statistical sampling
when testing internal controls?
A. The auditor should consider the tolerable rate of deviation from the controls being tested in
determining sample size.
B. As the likely rate of deviation decreases, the auditor should increase the planned sample
size.
C. The allowable risk of assessing control risk too low has no effect on the planned sample
size.
D. Of all the factors to be considered, the population size has the greatest effect on the sample
size.
60. To determine sample size in an attribute sampling application, what must be specified?
A. Population mean, expected error rate, allowance for sampling risk.
B. Allowance for sampling risk, risk of assessing control risk too low, standard deviation.
C. Allowance for sampling risk, risk of assessing control risk too low, expected deviation rate.
D. Population mean, standard deviation, allowance for sampling risk.
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Chapter 09 - Audit Sampling
61. The tolerable deviation rate in sampling for tests of controls is:
A. Used to determine the probability of the auditor's conclusion based upon reliance factors.
B. The probability that the financial statements are not materially in error.
C. A measure of the reliability of substantive tests.
D. The rate the auditor will tolerate without modifying the planned assessment of control risk.
62. In testing accounts receivable, an auditor sends out positive confirmation requests to 100
randomly selected customers. A customer returns the confirmation indicating that the balance
is correct when, in fact, the balance is overstated. This is an example of:
A. Projected misstatement.
B. Sampling error.
C. Standard error.
D. Nonsampling error.
63. An auditor wishes to estimate inventory shrinkage by weighing a sample of inventory
items. From experience, the auditor knows that a few specific items are subject to unusually
large amounts of shrinkage. In using statistical sampling, the auditor's best course of action is
to:
A. Eliminate any of the items known to be subject to unusually large amounts of shrinkage.
B. Increase the sample size to lessen the effect of the items subject to unusually large amounts
of shrinkage.
C. Stratify the inventory population so that items subject to unusually large amounts of
shrinkage are reviewed separately.
D. Continue to draw new samples until a sample is drawn which includes none of the items
known to be subject to large amounts of shrinkage.
64. If all other factors specified in an attributes sampling plan remain constant, changing the
specified tolerable rate from 6% to 10%, and changing the specified risk of assessing control
risk too low from 3% to 7% would cause the required sample size to:
A. Increase.
B. Remain the same.
C. Decrease.
D. Change by 4%.
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Chapter 09 - Audit Sampling
65. Which of the following factors does an auditor need to consider in planning a particular
audit sample for a test of control?
A. Number of items in the population.
B. Total dollar amount of the items to be sampled.
C. Acceptable level of risk of assessing control risk too low.
D. Tolerable misstatement.
66. When using a statistical sampling plan, the auditors would probably require a smaller
sample if the:
A. Population increases.
B. Desired allowance for sampling risk decreases.
C. Desired risk of incorrect acceptance increases.
D. Expected deviation rate increases.
67. Which of the following statements is correct concerning statistical sampling in tests of
controls?
A. The population size has little effect on determining sample size except for very small
populations.
B. The expected population deviation rate has little or no effect on determining sample size
except for very small populations.
C. As the population size doubles, the sample size also should double.
D. For a given tolerable rate, a larger sample size should be selected as the expected
population deviation rate decreases.
68. An advantage of using statistical sampling techniques is that such techniques:
A. Mathematically measure risk.
B. Eliminate the need for judgmental decisions.
C. Define the values of allowance for sampling risk and tolerable misstatement required to
provide audit satisfaction.
D. Have been established in the courts to be superior to judgmental sampling.
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Chapter 09 - Audit Sampling
69. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control
risk too high relate to the:
A. Efficiency of the audit.
B. Effectiveness of the audit.
C. Selection of the sample.
D. Audit quality controls.
70. When performing a test of a control over cash disbursements, a CPA 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 recorded in a systematic pattern before the sample can be drawn.
B. May occur in a systematic pattern and destroy the sample randomness.
C. May systematically occur more than once in the sample.
D. Must be systematically replaced in the population after sampling.
71. While performing a substantive 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. Incorrect acceptance.
B. Incorrect rejection.
C. Assessing control risk too high.
D. Assessing control risk too low.
72. An auditor plans to examine a sample of 20 checks for counter signatures as prescribed by
the client's control procedures. One of the checks in the chosen sample of 20 cannot be found.
The auditor should consider the reasons for this limitation and:
A. Evaluate the results as if the sample size had been 19.
B. Treat the missing check as a deviation for the purpose of evaluating the sample.
C. Treat the missing check in the same manner as the majority of the other 19 checks, i.e.,
countersigned or not.
D. Choose another check to replace the missing check in the sample.
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Chapter 09 - Audit Sampling
73. There are many kinds of statistical estimates that an auditor may find useful, but basically
every statistical estimate in auditing is of either a quantity or of an error rate. The statistical
terms that roughly correspond to "quantities" and "occurrence rate", respectively, are:
A. Attributes and variable.
B. Variables and attributes.
C. Constants and attributes.
D. Constants and variables.
74. Which of the following best illustrates 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. An auditor may select audit procedures that are not appropriate to achieve the specific
objective.
C. An auditor may fail to recognize deviations in the documents examined for the chosen
sample.
D. The documents related to the chosen sample may not be available for inspection.
75. Which of the following statistical selection techniques is least desirable for use by an
auditor?
A. Systematic selection.
B. Stratified selection.
C. Block selection.
D. Sequential selection.
76. Various 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. Lower assessment of control risk.
B. Greater reliance on analytical procedures.
C. Smaller expected frequency of misstatements.
D. Smaller measure of tolerable misstatement.
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Chapter 09 - Audit Sampling
77. An important statistic to consider when using a statistical sampling audit plan is the
population variability. The population variability is measured by the:
A. Sample mean.
B. Standard deviation.
C. Standard error of the sample mean.
D. Estimated population total minus the actual population total.
78. In variables estimation sampling, the sample standard deviation is used to calculate the
A. Point estimate of central tendency.
B. Tainting of the sample interval.
C. Risk of incorrect acceptance.
D. Adjusted allowance for sampling risk.
79. Use of the ratio estimation sampling technique to estimate dollar amounts is inappropriate
when:
A. The total book value is known and corresponds to the sum of all the individual book
values.
B. A book value for each sample item is unknown.
C. There are some observed differences between audited values and book values.
D. The audited values are nearly proportional to the book value.
Essay Questions
80. Audit sampling is used in conjunction with many audit tests, and may be performed on a
statistical or nonstatistical basis.
a. Define the term audit sampling.
b. List and explain two advantages of the use of statistical sampling as compared to
nonstatistical sampling.
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Chapter 09 - Audit Sampling
81. Teal Corporation has 2,000 accounts receivable, with a total book value of $200,000.
Ricardo Ramaro, CPA, has selected and audited a sample of 100 of the accounts with a
combined book value of $10,100; the total of their audited values was $11,000. Using the
mean-per-unit method, calculate the:
a. Accounts receivable estimated audited value.
b. Projected misstatement.
82. The auditors are using mean-per-unit sampling to evaluate the reasonableness of the book
value of the accounts receivable of Smith, Inc. Smith has 10,000 receivable accounts with a
total book value of $800,000. The auditors estimate the population's standard deviation as
being equal to $25. After examining the overall audit plan, the auditors believe that the
account's tolerable misstatement is $40,000, and that a risk of incorrect rejection of .10 (risk
coefficient = 1.64) and a risk of incorrect acceptance of .15 (risk coefficient = 1.04) should be
used.
Required:
a. Calculate the required sample size.
Now ignore your sample size calculation in part "a," and assume that your answer was a
sample size of 289 (the square root of 289 is 17) and that you obtained the following results:
Average audited value of items in sample: $76
Average book value of items in sample: $78
Standard Deviation in the sample (audited values): $24
Standard Deviation in the sample (book values): $26
b. Using mean-per-unit sampling, calculate the projected misstatement for the population.
c. Using mean-per-unit sampling, calculate the adjusted allowance for sampling risk and use it
to form a statistical conclusion concerning the book value of the population ($800,000). That
is, calculate an interval and either "accept" or "reject" the client's book value.
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Chapter 09 - Audit Sampling
Chapter 09 Audit Sampling Answer Key
True / False Questions
1. Stratification of the population generally results in a more efficient sampling plan.
TRUE
Difficulty: Medium
2. Discovery sampling is equivalent to an attributes sampling plan with a specified expected
deviation rate of 0 percent.
TRUE
Difficulty: Medium
3. Increases in the number of deviations in an attributes sample results in an increase in the
achieved upper deviation rate of the attributes sample.
TRUE
Difficulty: Medium
4. The definition of a "deviation" for a test of a control should include only those deviations
that result in misstatements in the financial statements.
FALSE
Difficulty: Hard
5. Statistical sampling cannot be used to test all control activities.
TRUE
Difficulty: Medium
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Chapter 09 - Audit Sampling
6. Using ratio and difference estimation for a sample is an example of a dual purpose test.
FALSE
Difficulty: Medium
7. Increases in the tolerable misstatement result in a decreased sample size when using meanper-unit estimation.
TRUE
Difficulty: Medium
8. The mean book value of the items included in a mean-per-unit sample is not directly used
in the evaluation of sample results.
TRUE
Difficulty: Hard
9. When evaluating the results of a variables sampling plan, the projected misstatement is
calculated and compared to the tolerable misstatement.
TRUE
Difficulty: Easy
10. Auditors project the misstatements found in the sample to the population when using
statistical sampling, but not when using nonstatistical sampling.
FALSE
Difficulty: Medium
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Chapter 09 - Audit Sampling
Multiple Choice Questions
The 10,000 accounts receivable of DEF Company have a total book value of $120,000. A
CPA has selected and audited a sample of 100 accounts with a total book value of $1,000 and
an audited value of $1,200.
11. Using the difference estimation technique, estimated total audited value of the population
is:
A. $100,000.
B. $120,000.
C. $140,000.
D. $144,000
Difficulty: Medium
12. Using the ratio estimation technique, the estimated total audited value of the population
is:
A. $100,000.
B. $120,000.
C. $140,000.
D. $144,000
Difficulty: Medium
13. Using the mean-per-unit estimation technique, the estimated total audited value of the
population is:
A. $100,000.
B. $120,000.
C. $140,000.
D. $144,000.
Difficulty: Medium
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Chapter 09 - Audit Sampling
14. Using the mean-per-unit estimation method an auditor has properly calculated the
estimated total audited value of a population as $200,000. Her sample included 200 of the
population's 40,000 items. She found that, in her sample the average audited value was $1 less
than the average book value. What was the average audited value in the sample?
A. $4.
B. $5.
C. $6.
D. $10.
Difficulty: Hard
15. Using difference estimation, an auditor has taken a sample of 200 from a population's
40,000 items; that population has a book value of $200,000. She found that in her sample the
average audited value was $4.20, while the average book value was $5.20. What is the
estimated total audited value of the population?
A. $160,000.
B. $161,538.
C. $168,000.
D. $200,000.
Difficulty: Medium
16. Using ratio estimation, an auditor has taken a sample of 200 from a population's 40,000
items; that population has a book value of $200,000. She found that in her sample the average
audited value was $4.20, while the average book value was $5.20. What is the estimated total
audited value of the population?
A. $160,000.
B. $161,538.
C. $168,000.
D. $200,000.
Difficulty: Medium
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Chapter 09 - Audit Sampling
17. Using mean-per-unit estimation, an auditor has taken a sample of 200 from a population's
40,000 items; that population has a book value of $200,000. She found that in her sample the
average audited value was $4.20, while the average book value was $5.20. What is the
estimated total audited value of the population?
A. $160,000.
B. $161,538.
C. $168,000.
D. $200,000.
Difficulty: Medium
18. If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable
misstatement is $9,000, what would an auditor likely conclude?
A. Since the projected misstatement is less than the tolerable misstatement, the account is not
misstated.
B. Since the projected misstatement is less than the tolerable misstatement, the account is
misstated.
C. The risk is high that the account is materially misstated.
D. The analysis has been improperly performed since the projected misstatement is unequal to
the tolerable misstatement.
Difficulty: Hard
19. A dual purpose test simultaneously.
A. Addresses two different accounts.
B. Functions as a substantive test and as a test of controls.
C. Functions as an analytical procedure and a substantive test.
D. Substantiates an ending balance and the transactions making up the balance.
Difficulty: Medium
The 1000 accounts receivable of Winco Company have a total book value of $20,000
(Average book value = $20). Bob Duffo, CPA, has selected and audited a sample of 50
accounts with the following mean values:
1. Book value of $19.
2. Audited value of $19.60.
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Chapter 09 - Audit Sampling
20. What is the estimated total audited value using mean per unit sampling?
A. $19,000.
B. $19,600.
C. $20,000.
D. $20,632.
Difficulty: Medium
21. What is the estimated total audited value using difference estimation sampling?
A. $19,387.
B. $19,400.
C. $19,600.
D. $20,600.
Difficulty: Hard
22. If all other factors specified in an attributes sampling plan remain constant, decreasing the
tolerable rate and decreasing the risk of assessing control risk too low would have what effect
on sample size?
A. Increase.
B. Remain the same.
C. Decrease.
D. Indeterminate, depends upon exact change being made.
Difficulty: Hard
23. If all other factors specified in an attributes sampling plan remain constant, decreasing the
tolerable rate and increasing the estimated population deviation rate would have what effect
on sample size?
A. Increase.
B. Remain the same.
C. Decrease.
D. Indeterminate, depends upon exact change being made.
Difficulty: Hard
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Chapter 09 - Audit Sampling
24. An increase in the tolerable misstatement has what effect on the planned allowance for
sampling risk?
A. Increases.
B. Decreases.
C. No effect.
D. Indeterminate.
Difficulty: Medium
25. Which of the following is not generally used for selecting samples?
A. Random number tables.
B. Random number generators.
C. Physical representation numbers.
D. Systematic selection.
Difficulty: Easy
26. In performing a test of a control last year the auditors specified a tolerable deviation rate
of X percent. This year the auditors have specified a tolerable rate of less than X percent.
Assuming that all other factors remain the same, which of the following is true regarding the
relationship between this year's sample size compared to last year's sample size?
A. This year's sample is larger than last year's sample.
B. This year's sample is smaller than last year's sample.
C. This year's sample is equal to last year's sample.
D. This year's sample is indeterminate in relation to last year's sample.
Difficulty: Medium
27. The auditor using nonstatistical attributes sampling, but who nevertheless has chosen the
sample in conformity with random selection procedures:
A. Need not consider the risk of assessing control risk too low.
B. Has committed a nonsampling error.
C. Will have to use discovery sampling techniques to evaluate the results.
D. Should compare the deviation rate of the sample to the tolerable rate.
Difficulty: Medium
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Chapter 09 - Audit Sampling
28. When performing tests of controls over authorization of cash receipts, which of the
following sampling methods would be most appropriate?
A. Attributes.
B. Ratio.
C. Stratified.
D. Variables.
Difficulty: Easy
29. Which of the following statistical sampling techniques involves taking samples in a series
of stages?
A. Systematic sampling.
B. Sequential sampling.
C. Continuous sampling.
D. Multiple location sampling.
Difficulty: Easy
30. Which of the following is generally not true about statistical sampling as compared to
nonstatistical sampling?
A. Statistical samples are more representative of the population.
B. Statistical sample plans involve additional costs of evaluation.
C. Statistical sampling allows a more objective evaluation of sample results.
D. Statistical sampling may assist the auditors in designing more efficient samples.
Difficulty: Medium
31. When using statistical sampling, which of the following need not be known to evaluate
the results of an attributes sample?
A. Sample size.
B. Risk of assessing control risk too low.
C. Number of deviations in the population.
D. Number of deviations found in the sample.
Difficulty: Easy
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Chapter 09 - Audit Sampling
32. When the auditors have decided to use statistical rather than nonstatistical sampling, a
disadvantage is that:
A. Designing efficient samples is more difficult.
B. The costs of training staff may be higher.
C. Sampling without replacement must be used.
D. Objectively evaluating results is impossible.
Difficulty: Easy
33. Changing from a sampling plan using random selection with replacement to random
selection without replacement has what effect on the required sample size?
A. Increases.
B. Decreases
C. No effect.
D. An indeterminate effect.
Difficulty: Medium
34. When the auditors have chosen to test a control, what relationship will the tolerable rate
normally have when compared to the expected rate of deviations in the sample?
A. Exceed.
B. Equal.
C. Be less than.
D. Indefinite.
Difficulty: Hard
35. Increases in the planned allowance for sampling risk have what effect on required sample
size?
A. Increases.
B. Decreases.
C. No effect.
D. Indeterminate.
Difficulty: Medium
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Chapter 09 - Audit Sampling
36. When using sampling for tests of controls, which of the following audit consequences
may follow?
A. If sample results indicate that the control is operating effectively, but in fact it is not,
control risk will be assessed too low.
B. If sample results indicate that the control is operating effectively, but in fact it is not,
control risk will be assessed too high.
C. If sample results indicate that the control is not operating effectively, but in fact it is
operating effectively, the audit is likely to be faulty because of reduced substantive tests.
D. If sample results indicate that the control is not operating effectively, but in fact it is
operating effectively, control risk will be assessed too low.
Difficulty: Hard
37. The auditors expect a population deviation rate of billing errors of two percent, and have
established a tolerable rate of five percent. The sampling approach most likely to be used is:
A. Attributes sampling.
B. Stratified sequential sampling.
C. Discovery sampling.
D. None, as sampling does not seem appropriate in this situation.
Difficulty: Easy
38. The auditors expect a population deviation rate of billing errors of eight percent, and have
established a tolerable rate of five percent. The sampling approach most likely to be used is:
A. Attributes sampling.
B. Stratified random sampling.
C. Variables sampling.
D. None, as sampling does not seem appropriate in this situation.
Difficulty: Medium
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Chapter 09 - Audit Sampling
39. Which of the following may be used to reduce the risk of nonsampling errors?
A. Increasing the size of audit samples.
B. Stratifying audit samples.
C. Adequately planning audit samples.
D. Using statistical sampling techniques.
Difficulty: Medium
40. Which of the following types of risk is of critical importance to auditors in performing
tests of controls?
A. The risk of assessing control risk too low.
B. The risk of assessing control risk too high.
C. The risk of incorrect acceptance.
D. The risk of incorrect rejection.
Difficulty: Medium
41. The auditors' failure to recognize a misstatement in an amount or a deviation in an internal
control data processing procedure is described as a:
A. Statistical error.
B. Sampling misstatement.
C. Standard error of the mean.
D. Nonsampling error.
Difficulty: Easy
42. What effect does obtaining a sample with a standard deviation larger than that estimated
during planning have on the adjusted allowance for sampling risk?
A. Increases.
B. Decreases.
C. No effect.
D. Indeterminate.
Difficulty: Hard
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Chapter 09 - Audit Sampling
The 2000 accounts receivable of ABC Company have a total book value of $40,000. Bob
Rotter, CPA, has selected and audited a sample of 100 accounts with a total book value of
$1,950. The audited value of the 100 accounts in the sample is $1,875.
43. Using the mean-per-unit estimation technique, Rotter's estimate (to the nearest dollar) of
year-end accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
Difficulty: Medium
44. Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of year-end
accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
Difficulty: Hard
45. Using the difference estimation technique, Rotter's estimate (to the nearest dollar) of yearend accounts receivable balance would be:
A. $37,500
B. $38,462
C. $38,500
D. $41,600
Difficulty: Hard
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Chapter 09 - Audit Sampling
46. The 3000 accounts receivable of DEF Company have a total book value of $60,000. Bob
Smith, CPA, has selected and audited a sample of 100 accounts with a total book value of
$2,100. Using the difference estimation technique, Smith has properly estimated a projected
misstatement of an overstatement of $6,000 for the entire population. The audited value of
Smith's sample is:
A. $1,700
B. $1,800
C. $1,900
D. $2,300
Difficulty: Hard
47. The 3000 accounts receivable of DEF Company have a total book value of $60,000. Bob
Smith, CPA, has selected and audited a sample of 100 accounts with a total book value of
$2,100. Using the difference estimation technique, Smith has properly estimated a projected
misstatement of a $9,000 overstatement for the entire population. The estimated total audited
value of the population is:
A. $51,000
B. $58,000
C. $60,000
D. $69,000
Difficulty: Medium
48. The 4000 accounts receivable of GHI Company have a total book value of $60,000. Bob
Smith, CPA, has selected and audited a sample of 100 accounts with a total book value of
$1,600. Using the mean-per-unit estimation technique, Smith has properly estimated a
projected misstatement of a $8,000 overstatement for the entire population. The audited value
of Smith's sample is:
A. $1,300
B. $1,400
C. $1,600
D. $1,800
Difficulty: Hard
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Chapter 09 - Audit Sampling
49. Which of the following is a correct statement with respect to evaluating results when
using nonstatistical sampling for substantive tests?
A. When the projected misstatement exceeds the tolerable misstatement, the auditor should
conclude that the population is not misstated.
B. The closer the projected misstatement is to the tolerable misstatement, the higher the risk
of material misstatement.
C. When the projected misstatement is equal to zero, the auditors may conclude with certainty
that no misstatements exist in the account.
D. When the projected misstatement percentage exceeds the risk of incorrect acceptance the
auditors will generally conclude that the population is materially misstated.
Difficulty: Medium
50. Assume a mean-per-unit estimation variables sampling application with a tolerable
misstatement of $70,000 and a book value of $700,000. After performing the sampling plan,
the auditors calculated an adjusted allowance for sampling risk of $45,000 and a point
estimate of the population's total audited value to be $650,000. Based on these results, the
auditor would:
A. Because the tolerable misstatement exceeds the adjusted allowance for sampling risk,
conclude that the population does not contain a material misstatement.
B. Because the total audited value  tolerable misstatement includes the book value, conclude
that the population does not contain a material misstatement.
C. Because the tolerable misstatement exceeds the adjusted allowance for sampling risk,
conclude that there is too great a risk that the account balance is materially misstated.
D. Because the total audited value  adjusted allowance for sampling risk does not include the
book value, conclude that there is too great a risk that the account balance is materially
misstated.
Difficulty: Hard
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Chapter 09 - Audit Sampling
51. Assume a mean-per-unit estimation variables sampling application with a tolerable
misstatement of $70,000 and a book value of $700,000. After performing the sampling plan,
the auditors calculated an adjusted allowance for sampling risk of $45,000 and a point
estimate of the population's total audited value to be $640,000. The projected misstatement
based on this sample is:
A. $ 5,000
B. $45,000
C. $60,000
D. $70,000
Difficulty: Medium
52. The auditors have audited a sample with a standard deviation of audited values larger than
they had originally estimated. In this situation, to maintain the risk of incorrect acceptance at
its predetermined level without increasing the size of the sample, which of the following
statements is correct?
A. The adjusted allowance for sampling risk will be smaller than had been planned.
B. The adjusted allowance for sampling risk will be larger than had been planned.
C. The risk of incorrect rejection will necessarily decrease.
D. The size of the population must be decreased.
Difficulty: Hard
53. In the past, the auditors have found that the book value of a receivable account has been
related to the amount the account is misstated (i.e., large accounts have large misstatements
and small accounts have small misstatements). Which of the following techniques is most
likely to be efficient?
A. Mean-per-unit estimation.
B. Ratio estimation.
C. Difference estimation.
D. Sequential sampling estimation.
Difficulty: Medium
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Chapter 09 - Audit Sampling
54. Which of the following statements is correct concerning the use of nonstatistical sampling
for substantive tests?
A. Its use is generally acceptable only for populations with an immaterial book value.
B. It requires the use of structured sample size selection techniques to be acceptable.
C. It may be especially useful in circumstances in which the combination of inherent and
control risk is at the maximum level.
D. Results will be projected to the population.
Difficulty: Medium
55. Which of the following situations will result in the auditors concluding that the risk of
material misstatement is too high when using nonstatistical sampling for substantive tests?
A. The projected misstatement exceeds the tolerable misstatement.
B. The allowance for sampling risk exceeds the projected misstatement.
C. The risk of incorrect acceptance exceeds the risk of incorrect rejection.
D. The tolerable misstatement exceeds the sample net misstatement.
Difficulty: Hard
56. During the final planning of the accounts receivable program a CPA specified a tolerable
misstatement of $30,000, instead of the $20,000 contained in the preliminary audit program.
What would be the impact of this change?
A. A decrease in population standard deviation.
B. An increase in sample standard deviation.
C. An increase in required sample size.
D. A decrease in the required sample size.
Difficulty: Medium
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Chapter 09 - Audit Sampling
57. Which of the following is an advantage of systematic selection over random number
selection?
A. It provides a stronger basis for statistical conclusions.
B. It enables the auditor to use the more efficient "sampling with replacement" tables.
C. There may be correlation between the location of items in the population, the feature of
sampling interest, and the sampling interval.
D. It does not require establishment of correspondence between random numbers and items in
the population.
Difficulty: Medium
Source: AICPA
58. Statistical sampling generally may be applied to test internal control when the client's
internal control procedures:
A. Depend primarily on appropriate segregation of duties.
B. Are carefully reduced to writing and are included in client accounting manuals.
C. Leave an audit trail in the form of evidence of compliance.
D. Enable the detection of material fraud in the accounting records.
Difficulty: Medium
Source: AICPA
59. Which of the following statements is correct about the sample size in statistical sampling
when testing internal controls?
A. The auditor should consider the tolerable rate of deviation from the controls being tested in
determining sample size.
B. As the likely rate of deviation decreases, the auditor should increase the planned sample
size.
C. The allowable risk of assessing control risk too low has no effect on the planned sample
size.
D. Of all the factors to be considered, the population size has the greatest effect on the sample
size.
Difficulty: Medium
Source: AICPA
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Chapter 09 - Audit Sampling
60. To determine sample size in an attribute sampling application, what must be specified?
A. Population mean, expected error rate, allowance for sampling risk.
B. Allowance for sampling risk, risk of assessing control risk too low, standard deviation.
C. Allowance for sampling risk, risk of assessing control risk too low, expected deviation
rate.
D. Population mean, standard deviation, allowance for sampling risk.
Difficulty: Hard
Source: IIA
61. The tolerable deviation rate in sampling for tests of controls is:
A. Used to determine the probability of the auditor's conclusion based upon reliance factors.
B. The probability that the financial statements are not materially in error.
C. A measure of the reliability of substantive tests.
D. The rate the auditor will tolerate without modifying the planned assessment of control risk.
Difficulty: Easy
62. In testing accounts receivable, an auditor sends out positive confirmation requests to 100
randomly selected customers. A customer returns the confirmation indicating that the balance
is correct when, in fact, the balance is overstated. This is an example of:
A. Projected misstatement.
B. Sampling error.
C. Standard error.
D. Nonsampling error.
Difficulty: Medium
Source: IIA
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Chapter 09 - Audit Sampling
63. An auditor wishes to estimate inventory shrinkage by weighing a sample of inventory
items. From experience, the auditor knows that a few specific items are subject to unusually
large amounts of shrinkage. In using statistical sampling, the auditor's best course of action is
to:
A. Eliminate any of the items known to be subject to unusually large amounts of shrinkage.
B. Increase the sample size to lessen the effect of the items subject to unusually large amounts
of shrinkage.
C. Stratify the inventory population so that items subject to unusually large amounts of
shrinkage are reviewed separately.
D. Continue to draw new samples until a sample is drawn which includes none of the items
known to be subject to large amounts of shrinkage.
Difficulty: Hard
Source: IIA
64. If all other factors specified in an attributes sampling plan remain constant, changing the
specified tolerable rate from 6% to 10%, and changing the specified risk of assessing control
risk too low from 3% to 7% would cause the required sample size to:
A. Increase.
B. Remain the same.
C. Decrease.
D. Change by 4%.
Difficulty: Hard
Source: AICPA
65. Which of the following factors does an auditor need to consider in planning a particular
audit sample for a test of control?
A. Number of items in the population.
B. Total dollar amount of the items to be sampled.
C. Acceptable level of risk of assessing control risk too low.
D. Tolerable misstatement.
Difficulty: Medium
Source: AICPA
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Chapter 09 - Audit Sampling
66. When using a statistical sampling plan, the auditors would probably require a smaller
sample if the:
A. Population increases.
B. Desired allowance for sampling risk decreases.
C. Desired risk of incorrect acceptance increases.
D. Expected deviation rate increases.
Difficulty: Medium
Source: AICPA
67. Which of the following statements is correct concerning statistical sampling in tests of
controls?
A. The population size has little effect on determining sample size except for very small
populations.
B. The expected population deviation rate has little or no effect on determining sample size
except for very small populations.
C. As the population size doubles, the sample size also should double.
D. For a given tolerable rate, a larger sample size should be selected as the expected
population deviation rate decreases.
Difficulty: Medium
Source: AICPA
68. An advantage of using statistical sampling techniques is that such techniques:
A. Mathematically measure risk.
B. Eliminate the need for judgmental decisions.
C. Define the values of allowance for sampling risk and tolerable misstatement required to
provide audit satisfaction.
D. Have been established in the courts to be superior to judgmental sampling.
Difficulty: Medium
Source: AICPA
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Chapter 09 - Audit Sampling
69. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control
risk too high relate to the:
A. Efficiency of the audit.
B. Effectiveness of the audit.
C. Selection of the sample.
D. Audit quality controls.
Difficulty: Medium
Source: AICPA
70. When performing a test of a control over cash disbursements, a CPA 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 recorded in a systematic pattern before the sample can be drawn.
B. May occur in a systematic pattern and destroy the sample randomness.
C. May systematically occur more than once in the sample.
D. Must be systematically replaced in the population after sampling.
Difficulty: Easy
Source: AICPA
71. While performing a substantive 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. Incorrect acceptance.
B. Incorrect rejection.
C. Assessing control risk too high.
D. Assessing control risk too low.
Difficulty: Medium
Source: AICPA
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Chapter 09 - Audit Sampling
72. An auditor plans to examine a sample of 20 checks for counter signatures as prescribed by
the client's control procedures. One of the checks in the chosen sample of 20 cannot be found.
The auditor should consider the reasons for this limitation and:
A. Evaluate the results as if the sample size had been 19.
B. Treat the missing check as a deviation for the purpose of evaluating the sample.
C. Treat the missing check in the same manner as the majority of the other 19 checks, i.e.,
countersigned or not.
D. Choose another check to replace the missing check in the sample.
Difficulty: Medium
Source: AICPA
73. There are many kinds of statistical estimates that an auditor may find useful, but basically
every statistical estimate in auditing is of either a quantity or of an error rate. The statistical
terms that roughly correspond to "quantities" and "occurrence rate", respectively, are:
A. Attributes and variable.
B. Variables and attributes.
C. Constants and attributes.
D. Constants and variables.
Difficulty: Easy
Source: AICPA
74. Which of the following best illustrates 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. An auditor may select audit procedures that are not appropriate to achieve the specific
objective.
C. An auditor may fail to recognize deviations in the documents examined for the chosen
sample.
D. The documents related to the chosen sample may not be available for inspection.
Difficulty: Easy
Source: AICPA
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Chapter 09 - Audit Sampling
75. Which of the following statistical selection techniques is least desirable for use by an
auditor?
A. Systematic selection.
B. Stratified selection.
C. Block selection.
D. Sequential selection.
Difficulty: Medium
Source: AICPA
76. Various 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. Lower assessment of control risk.
B. Greater reliance on analytical procedures.
C. Smaller expected frequency of misstatements.
D. Smaller measure of tolerable misstatement.
Difficulty: Hard
Source: AICPA
77. An important statistic to consider when using a statistical sampling audit plan is the
population variability. The population variability is measured by the:
A. Sample mean.
B. Standard deviation.
C. Standard error of the sample mean.
D. Estimated population total minus the actual population total.
Difficulty: Easy
Source: AICPA
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Chapter 09 - Audit Sampling
78. In variables estimation sampling, the sample standard deviation is used to calculate the
A. Point estimate of central tendency.
B. Tainting of the sample interval.
C. Risk of incorrect acceptance.
D. Adjusted allowance for sampling risk.
Difficulty: Easy
Source: AICPA
79. Use of the ratio estimation sampling technique to estimate dollar amounts is inappropriate
when:
A. The total book value is known and corresponds to the sum of all the individual book
values.
B. A book value for each sample item is unknown.
C. There are some observed differences between audited values and book values.
D. The audited values are nearly proportional to the book value.
Difficulty: Medium
Source: AICPA
Essay Questions
80. Audit sampling is used in conjunction with many audit tests, and may be performed on a
statistical or nonstatistical basis.
a. Define the term audit sampling.
b. List and explain two advantages of the use of statistical sampling as compared to
nonstatistical sampling.
a. Audit sampling is performing a test on less than 100 percent of an audit population to make
a conclusion about a characteristic of the population.
b. Statistical sampling may assist the auditors in (only two required):
 Designing efficient samples.
 Measuring the sufficiency of the evidence obtained.
 Objectively evaluating sample results (measuring sampling risk).
Difficulty: Medium
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Chapter 09 - Audit Sampling
81. Teal Corporation has 2,000 accounts receivable, with a total book value of $200,000.
Ricardo Ramaro, CPA, has selected and audited a sample of 100 of the accounts with a
combined book value of $10,100; the total of their audited values was $11,000. Using the
mean-per-unit method, calculate the:
a. Accounts receivable estimated audited value.
b. Projected misstatement.
a. The accounts receivable estimated audited value is calculated as:
b. The projected misstatement is calculated as the difference between the estimated total
audited value and the book value, calculated as follows:
Difficulty: Medium
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Chapter 09 - Audit Sampling
82. The auditors are using mean-per-unit sampling to evaluate the reasonableness of the book
value of the accounts receivable of Smith, Inc. Smith has 10,000 receivable accounts with a
total book value of $800,000. The auditors estimate the population's standard deviation as
being equal to $25. After examining the overall audit plan, the auditors believe that the
account's tolerable misstatement is $40,000, and that a risk of incorrect rejection of .10 (risk
coefficient = 1.64) and a risk of incorrect acceptance of .15 (risk coefficient = 1.04) should be
used.
Required:
a. Calculate the required sample size.
Now ignore your sample size calculation in part "a," and assume that your answer was a
sample size of 289 (the square root of 289 is 17) and that you obtained the following results:
Average audited value of items in sample: $76
Average book value of items in sample: $78
Standard Deviation in the sample (audited values): $24
Standard Deviation in the sample (book values): $26
b. Using mean-per-unit sampling, calculate the projected misstatement for the population.
c. Using mean-per-unit sampling, calculate the adjusted allowance for sampling risk and use it
to form a statistical conclusion concerning the book value of the population ($800,000). That
is, calculate an interval and either "accept" or "reject" the client's book value.
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Chapter 09 - Audit Sampling
Difficulty: Hard
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