Which of the following statements regarding block sampling is not true?
a. Block sampling is the selection of several items in sequence.
b. It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks is used.
c. A “reasonable number” for most situations is probably at least six blocks from six different periods, locations, divisions, and so forth.
d. Once the first item in the block is selected, the remainder of the block is chosen automatically.
A means of reducing the potential bias in systematic sample selection is to:
a. use multiple starts.
b. use a random number table.
c. include a large block of the population.
d. include only the high-dollar-value items.
When deciding on the acceptable risk of assessing control risk too low, the auditor should:
a. rely on his/her professional judgment.
b. err on the side of being conservative.
c. consult the professional standards.
d. do any of the above.
Which of the following statements is true?
a. The audit procedures will vary as a result of using either statistical or nonstatistical sampling.
b. The audit procedures will be the same for either statistical or nonstatistical sampling but they must be performed differently for each.
c. Statistical sampling requires quantitative audit procedures whereas nonstatistical sampling requires judgmental audit procedures.
d. The same audit procedures are performed in the same manner for either statistical or nonstatistical sampling.
When audit procedures have been completed for an attributes sampling application, the auditor must generalize from the sample to the population. Which of the following statements would be incorrect regarding this process?
a. The auditor would use an attributes sampling table to determine the computed upper exception rate.
b. The computed upper exception rate is the highest exception rate in the population that the auditor is willing to accept.
c. It would be wrong for the auditor to conclude that the population exception rate is exactly the same as the sample exception rate.
d. In selecting the table corresponding to the risk of overreliance, it should be the same as the ARACR used for determining the initial sample size.
When performing tests of controls and tests of transactions for sales, the auditor generally defines the population as:
a. all accounts receivable transactions for the year.
b. all sales invoices for the year.
c. all cash receipts transactions for the year.
d. all of the above.
The difference between the tolerable exception rate and the estimated population exception rate is called:
a. accuracy of the initial sample estimate.
b. inflation factor of the initial sample estimate.
c. precision of the initial sample estimate.
d. none of the above.
If an auditor, planning to use statistical sampling, is concerned with the number of a client’s sales invoices that contain mathematical errors, the auditor would most likely utilize:
a. random sampling with replacement.
b. sampling for attributes.
c. sampling for variables.
d. stratified random sampling.
If the result obtained from a particular sample is critical to the formation of an audit opinion, which of the following is the most important to the auditor?
a. Acceptable risk of assessing control risk too low.
b. Estimated population exception rate.
c. Tolerable exception rate.
d. Size of the population.
The tolerable rate of exceptions for tests of controls is generally:
a. lower than the expected rate of errors in the related accounting records.
b. higher than the expected rate of errors in the related accounting records.
c. identical to the expected rate of errors in the related accounting records.
d. unrelated to the expected rate of errors in the related accounting records.
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 precision and reliability required to provide audit satisfaction.
d. have been established in the courts to be superior to judgmental sampling.
Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to:
a. provide a mathematical measurement of uncertainty.
b. promote a more legally defensible procedural approach.
c. define the precision required to provide audit satisfaction.
d. establish conclusive audit evidence with decreased audit effort.
Which of the following is an advantage of systematic sample selection over random number sampling?
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.
What is an auditor’s evaluation of a statistical sample for attributes when a test of 100 documents results in four exceptions if the tolerable exception rate is 5%, the expected population exception rate is 3%, and the allowance for sampling risk is 2%?
a. Accept the sample results as support for planned reliance on the control because the tolerable rate less the allowance for sampling risk equals the expected population exception rate.
b. Modify planned reliance on the control because the sample exception rate plus the allowance for sampling risk exceeds the tolerable rate.
c. Modify planned reliance on the control because the tolerable rate plus the allowance for sampling risk exceeds the expected population exception rate.
d. Accept the sample results as support for planned reliance on the control because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.
In the evaluation of the results of an attributes sample, the fact that the exception rate in the sample was 2% rather than the estimated population exception rate of 4% would cause the computed upper exception rate to:
a. be less than the tolerable exception rate.
b. equal the tolerable exception rate.
c. exceed the tolerable exception rate.
d. cannot be determined from the information given.
If the size of the sample to be used in a test of attributes is not determined by using statistical concepts, but the sample is chosen in accordance with random selection procedures:
a. no inferences can be drawn from the sample.
b. the auditor has committed a nonsampling error.
c. the auditor may or may not achieve the tolerable exception rate at the acceptable risk of assessing control risk too low.
d. the auditor will have to evaluate results using the principles of discovery sampling.