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CHAPTER 15
Multiple-Choice Questions
A sample in which the characteristics of the sample are the same as those of the population is
a(n)
b. representative sample.
When the auditor decides to select less than 100 percent of the population for testing, the
auditor is said to be using
b. representative sampling.
One of the ways to eliminate nonsampling risk is through
a. proper supervision and instruction of the client’s employees.
b. proper supervision and instruction of the audit team.
c. the use of attributes sampling rather than variables sampling.
d. controls which ensure that the sample drawn is random and representative.
One cause of nonsampling risk is
a. ineffective use of audit procedures.
b. testing less than the entire population.
c. use of extensive tests of controls.
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
a. block sample selection.
c. systematic sample selection.
d. statistical selection.
When the auditor intends to evaluate a sample statistically, the only acceptable selection method
is
a. probabilistic selection.
d. block sample selection.
A sample in which every possible combination of items in the population has an equal chance of
constituting the sample is a
d. representative sample.
A. Which of the following statements is a valid criticism of the use of nonstatistical sampling methods?
Nonstatistical sampling does not differ substantially from statistical sampling methods.
B.
Many audit tests, such as footing of journals, must be performed outside a statistical
sampling context.
C.
The cost of performing random selection or testing often exceeds the benefits.
D.
It can be difficult to remain unbiased in the selection of items.
D
A sample in which the characteristics of the sample are the same as those of the population is a(n)
A.
representative sample.
B.
attribute sample.
C.
variables sample.
D.
random sample.
A
Assume that the client's internal controls require a clerk to attach a shipping document to every duplicate sales invoice but this procedure is not followed exactly 3 percent of the time. If the auditor selects a sample of 200 duplicate sales invoices, which of the following sample results is most representative of the population?
A.
five shipping document are missing
B.
six shipping documents are missing
C.
three shipping documents are missing
D.
there were no shipping documents missing
B
One of the ways to eliminate nonsampling risk is through
A.
the use of attribute sampling rather than variables sampling.
B.
controls that ensure the sample drawn is random and representative.
C.
proper supervision and instruction of the client's
employees.
D.
proper supervision and instruction of the audit team.
D
An underlying feature of the random-based selection of items is that each
A.
stratum of the population is given equal representation in the
sample.
B.
each item must be systematically selected using replacement.
C.
each item in the population must be randomly ordered.
D.
each item in the population should have an equal opportunity to be selected.
D
Helen found that the expense reports were not properly approved while the senior accounts payable clerk was on vacation in July. Helen decided to perform a test of control on the authorization of expense reports for all the months except for July, which she will test substantively. Helen is allowed to do this because
A.
compensating controls exist in the payroll reconciliation process.
B.
the authorizations for the month of July are not representative of the population as a
whole.
C.
the authorized expense reports for July are not material.
D.
it would not be cost beneficial to test the entire population substantively.
B
A statistical method used to estimate the proportion of items in a population containing a characteristic of interest is
A.
estimation sampling.
B.
attribute sampling.
C.
population-proportional-to-size sampling.
D.
variables sampling.
B
The auditing standards indicate
that
A.
it is preferable to use nonstatistical sampling instead of statistical sampling.
B.
it is equally acceptable to use either statistical or nonstatistical sampling.
C.
nonstatistical sampling should only be used if statistical sampling is too costly to use.
D.
it is preferable to use statistical sampling instead of nonstatistical sampling.
B
In performing a review of his client's cash disbursements, a public accountant uses systematic sampling with a random start. The primary disadvantage of systematic sampling is that population items
A.
must be replaced in the population after sampling to permit valid statistical inference.
B.
may occur twice in the sample.
C.
may
occur in a systematic pattern, thus negating the randomness of the sample.
D.
must be reordered in a systematic pattern before the sample can be drawn.
C
The most common method used for performing statistical tests of
controls is
A.
variables sampling.
B.
judgment sampling.
C.
attribute sampling.
D.
random selection of samples.
C
One of the ways to reduce sampling risk is to
A.
use an appropriate method of
selecting sample items from the population.
B.
carefully design the audit procedures to be used.
C.
provide proper supervision and instruction of the audit team.
D.
use variables sampling rather than attribute sampling.
C
Nonsampling errors occur when audit tests do not uncover existing exceptions in the
A.
planning stage.
B.
sample.
C.
population.
D.
financial statements.
B
Auditors consider
statistical sampling to be characterized by
A.
representative sample selection and statistical calculation of the results.
B.
representative sample selection and nonmathematical consideration of the results.
C.
carefully biased sample selection and nonmathematical consideration of the results.
D.
carefully biased sample selection and statistical calculation of the results.
A
The auditor is going to select a sample that is a statistical probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic or attribute of interest. The auditor is using what type of sampling?
A.
variable estimation
sampling
B.
monetary unit sampling
C.
attribute sampling
D.
discovery sampling
C
When statistical sampling is used, the sample selected must be a probabilistic one. In addition, the auditor
should
A.
use the haphazard selection method to make sure that the sample is properly selected.
B.
request the client to review the sample and approve all items that are selected.
C.
use appropriate statistical evaluation methods of nonsampling risk computations.
D.
use appropriate statistical evaluation methods of sampling risk computations.
D
8 - Which one of the following is an example of a specific authorization?
A.
The highest credit limit allowed for accounts receivable customers is $100 000.
B.
Each sales transaction that exceeds the credit limit of a customer must be approved by the controller.
C.
The computer systems automatically reorder inventory when quantities fall below
the economic order quantity.
D.
Grocery sales clerks may approve returns of goods less than ten dollars in value.
B
8 - Management assesses risks as a part of designing and operating internal controls to minimize fraud and errors. Auditors assess risks to
A.
decide the evidence needed in the audit.
B.
make sure that the company will continue to operate over the next year.
C.
enable them to assess the completeness of internal controls.
D.
fully implement the audit risk model.