1.

Evaluate whether each of the following statements qualifies as sampling:

I. Test performed on 100% of the items within a population
II. Selecting items over a certain amount
III. Selecting items for the total population on the basis that was expected to be representative
a. I, II and III
b. I and II
c. III only
d. None of I, II and III

2. It involves the application of audit procedures to less than 100 percent of items within an account balance or class of
transactions such that all sampling units have a chance of selection.
a. Analytical procedures
b. Audit sampling
c. Substantive testing
d. Tests of controls

3. Audit sampling, identifies two general approaches to audit sampling. They are
a. Random and nonrandom
b. Statistical and nonstatistical
c. Precision and reliability
d. Risk and nonrisk

4. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to
a. Minimize the failure to detect errors and irregularities.
b. Eliminate the risk of nonsampling errors.
c. Reduce the level of audit risk and materiality to a relatively low amount.
d. Mathematically measures sampling risk.

5. A nonstatistical sampling plan can:

a. Overstate the estimate of sampling risk
b. Misdirect an auditor to unreliable sampling units
c. Replicate the results of a statistical sampling plan
d. Understate the degree of audit assurance desired

6. The probability that an auditor’s conclusion based on a sample might be different from the conclusion based on an audit
of the entire population is the concept of
a. Sampling risk
b. Confidence levels
c. Statistical sampling
d. Tolerable rate and the expected deviation rate

7. The risk that the auditor does not recognize misstatements or deviations included in the sample for what they are
a. Sampling risk
b. Confidence levels
c. Statistical sampling
d. Nonsampling risk

8. Which of the following is not an element of non-sampling risk?

a. The auditor uses inappropriate procedures in auditing accounts receivable
b. The use of unreasonable small sample size
c. Misinterpretations of audit evidence
d. Auditor fails to recognize the error in the sample

9. 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 errors in the documents examined for the chosen sample.
d. The documents related to the chosen sample may not be available for inspection.
10. At times a sample may indicate that the auditor's planned degree of reliance on a given control is reasonable when, in fact,
the true compliance rate does not justify such reliance. This situation illustrates the risk of
a. Over reliance.
b. Under reliance
c. Incorrect precision.
d. Incorrect rejection.

11. At times a sample may indicate that the auditor's planned degree of reliance on a given control is unreasonable when, in
fact, the true compliance rate does justify such reliance. This situation illustrates the risk of
a. Over reliance.
b. Under reliance.
c. Incorrect precision.
d. Incorrect rejection.

12. While performing a substantive test of details during an audit, the auditor determined that the sample results reported
the conclusion that the recorded account balances was not materially misstated. It was in fact, materially misstated. This
situation illustrates the risk of
a. Incorrect rejection
b. Incorrect acceptance
c. Over reliance
d. Under reliance

13. While performing a substantive test of details during an audit, the auditor determined that the sample results reported
the conclusion that the recorded account balances was materially misstated. It was in fact, not materially misstated. This
situation illustrates the risk of
a. Incorrect rejection
b. Incorrect acceptance
c. Over reliance
d. Under reliance

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

15. The risk likelihood of assessing control risk too low (risk of over reliance) and risk of incorrect acceptance relate to
the
a. Efficiency of the audit
b. Effectiveness of the audit
c. Preliminary estimates of materiality levels
d. Allowable risk of tolerable misstatements

16. Which of the following sampling methods is most useful to auditors when performing tests of controls?
a. Discovery sampling
b. Attribute estimation (attributes sampling)
c. Variable sampling
d. Unrestricted random sampling with replacement

17. Which of the following statistical sampling plans does not use a fixed sample size for tests of controls?
a. Ratio estimation sampling
b. Sequential sampling
c. PPS sampling
d. Variable sampling

18. If the auditor is concerned that a population may contain exceptions, the determination of a sample size sufficient to
include at least one such exception is a characteristic of
a. Discovery sampling
b. Variable sampling
c. Random sampling
d. Probability proportional to size sampling
19. Anomalous error means
a. An error that arises from isolated event that has not recurred other than on specifically identifiable occasions and is
therefore not representative of errors in the population
b. An error that the auditor expects to be present in the population
c. The maximum error in a population that the auditor is willing to accept
d. The possibility that the auditor’s conclusion, based on a sample may be different from the conclusion reached if the
entire population were subjected to the same audit procedure

20. Represents the entire set of data from which a sample is selected and about which the auditor wishes to draw
conclusions.
a. Audit sampling
b. Sampling units
c. Audit Population
d. Stratification

21. The individual items constituting a population

a. Audit sampling
b. Sampling units
c. Audit population
d. Stratification

22. When sampling for attributes, which of the following would decrease sample size?
I. Intended reliance internal controls
II. Tolerable deviation rate
III. Expected deviation rate
IV. Risk of assessing control risk too low
a. I – Increase; II – Decrease; III – Increase; IV – Decrease
b. I – Decrease; II – Increase; III – Decrease; IV – Increase
c. I – Increase; II – Increase; III – Decrease; IV – Increase
d. I – Decrease; II – Increase; III – Decrease; IV – Decrease

23. To determine the sample size for a test of control, an auditor should consider the tolerable rate of deviation, the
allowable risk of assessing control risk too low and the
a. Expected deviation rate
b. Upper precision limit
c. Risk of incorrect acceptance
d. Risk of incorrect rejection

24. The tolerable rate of deviations for a test of controls is generally

a. Lower than the expected rate of errors in the related accounting population
b. Higher than the expected rate of errors in the related accounting population
c. Identical to the expected rate of errors in the related accounting population
d. Unrelated to the expected rate of errors in the related accounting population

25. Which of the following statements is correct concerning statistical sampling in tests of controls?
a. The population size has little or no effect on determining sample size except for very small population.
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. A large sample size should be selected as the expected population deviation rate decreases.

26. Which of the following statements is correct concerning statistical sampling in tests of controls?
a. There is an inverse relationship between the sample size and the expected population deviation rate.
b. As the population size doubles, the sample size should also double.
c. The qualitative aspects of deviations are not considered by the auditor.
d. There is an inverse relationship between the sample size and the tolerable rate.
27. Identify the sample selection method used, following the same order:
I. Selecting items using a constant interval between selections; the first interval having a random start.
II. Selecting items from the entire population with no intention to include or exclude specific units
III. All items in the population or within each stratum have a known chance of selection
a. Systematic, random, haphazard.
b. Systematic, haphazard, random.
c. Haphazard, systematic, random.
d. Random, systematic, haphazard.

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

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

29. If certain forms are not consecutive numbered

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

30. 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

31. An auditor plans to examine a sample of 20 purchase orders for proper approvals as prescribed by the client’s internal
control procedures. One of the purchase orders in the chosen sample of 20 cannot be found, and the auditor is unable to
use alternative procedures to test whether that purchase order was properly approved. The auditor should
a. Choose another purchase order to replace the missing purchase order in the sample.
b. Consider this test of control invalid and proceed with substantive tests since internal control cannot be relied upon.
c. Treat the missing purchase order as a deviation for the purpose of evaluating the sample.
d. Select a completely new set of 20 purchase orders.

32. An auditor is testing internal control procedures that are evidenced on an entity’s vouchers by matching random
numbers with voucher numbers. If a random number matches the number of voided voucher, that voucher ordinarily
should be replaced by another voucher in the random sample if the voucher
a. Constitutes a deviation.
b. Has been properly voided.
c. Cannot be located.
d. Represents an immaterial peso amount.

33. An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a
statistical sample that would provide 1% risk of assessing control risk too low (99% confidence) that not more than 7% of
the sales invoices lacked approval. The auditor estimated from previous experience that about 2 1/2% of the sales invoices
lacked approval. A sample of 200 invoices was examined and 7 of them were lacking approval. The auditor then
determined the achieved upper precision limit to be 8%. The allowance for sampling risk was
a. 5 1/2%
b. 4 1/2%
c. 3 1/2%
d. 1%

34. In the evaluation of this sample, the auditor decided to increase the level of preliminary assessment of control risk (CR
is high) because the
a. Tolerable rate (7%) was less than the achieved upper precision limit (8%)
b. Expected deviation rate (7%) was more than the percentage of errors in the sample (3 1/2%)
c. Achieved upper precision limit (8%) was more than the percentage of error in the sample (3 1/2%)
d. Expected deviation rate (2 1/2%) was less than the tolerable rate (7%)
35. An auditor who uses statistical sampling for attributes in testing internal controls should increase the assessed level of
control risk (CR is high) when the
a. Sample rate of deviation is less than the expected rate of deviation used in planning the sample
b. Tolerable rate less the allowance for sampling risk exceeds the sample rate of deviation
c. Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate
d. Sample rate of deviation plus the allowance for sampling risk equals the tolerable rate

36. Which of the following sampling methods would be used to estimate a numerical measurement of a population such as
a peso value?
a. Attributes sampling
b. Stop or go sampling
c. Variables sampling
d. Random number sampling

37. The following are the classical variables techniques, except

a. Ratio estimation
b. MPU estimation
c. Value weighted selection
d. Difference estimation

38. In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into
meaningful groups is
a. Probability proportional to size (PPS) sampling is used
b. The population has highly variable recorded amounts
c. The auditor’s estimated tolerable misstatement is extremely small
d. The standard deviation of recorded amount is relatively small

39. In substantive testing, which of the following would increase sample size?
I. Assessment of control risk
II. Reliance on other substantive procedures
III. Tolerable misstatement
IV. Expected amount of misstatement
V. Risk of incorrect acceptance
a. Increase, Increase, Decrease, Increase, Decrease
b. Increase, Decrease, Increase, Decrease, Increase
c. Increase, Decrease, Decrease, Increase, Decrease
d. Decrease, Increase, Increase, Decrease, Increase

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

41. Determine which of the following would lead to a larger sample size for substantive test of details of an account
balance. Assume all other factors being equal
a. Smaller measure of tolerable misstatement
b. Greater reliance of analytical procedures
c. Greater reliance on internal controls
d. Smaller expected frequency of errors

42. An auditor is applying mean per unit estimation sampling plan. Assuming estimated audited value is 975,000, the
achieved allowance for sampling risk is 75,000 and recorded book value is 925,000. What is the auditor’s conclusion?
a. Recorded book value is not likely misstated by a material amount
b. Recorded book value is misstated by a material amount
c. Recorded book value is not likely misstated by a material amount, assuming the client records an adjusting entry equal
to the allowance for sampling risk
d. There is insufficient evidence to reach a conclusion