Auditing - Chapter 9 Smartbook
Which of the following types of sampling is most likely used to provide an estimate of a dollar amount of misstatement and to perform substantive procedures?
Classical variables sampling
When auditors assess inherent and control risk as high and do not perform other effective tests of this assertion, the risk of incorrect acceptance must be set at ______.
a very low level
When a sample item does not have one or more attributes, it is classified as a(n) ______.
deviation
The projected misstatement = (Sample net misstatement ÷ Sample items) × Population items when using
difference estimation
The three forms of classical variables sampling discussed in the text are mean-per-unit estimation, _____ estimation and _____ estimation.
difference, ratio
Auditors failing to recognize errors in the documents or transactions examined results in
nonsampling risk
When auditors estimate sampling risk by using professional judgment, judgmental or
nonstatistical
(Population book value ×Reliability factor) ÷ Tolerable misstatement can be used to determine a(n)
nonstatistical sample size
When auditors sample from the balance of receivables, but do not include all actual receivables, the physical representation of the population ______.
differs from the actual population
The purpose of a(n) _____ sample is to detect at least one deviation.
discovery
To search for critical deviations auditors primarily use ______ sampling.
discovery
Calculating sample size and evaluating results rely most on individual auditor judgment when using ______ sampling.
nonstatistical variables
Structure is often added to _____ _____ sampling by adding guidelines based on statistical approaches.
nonstatistical variables
Monetary unit sampling ______.
often results in smaller sample sizes than classical variables sampling applies the theory of attributes sampling
With a very small sample, there cannot be low sampling risk unless a very large allowance for sampling risk or
precision is allowed
In MUS sampling, the allowance for sampling risk = basic _____ + _____ allowance
precision, incremental
Auditors determine the tolerable deviation rate for a test of control by using ______.
professional judgment
Unlike statistical sampling, auditors who use nonstatistical sampling ______.
do not quantify the level of sampling risk do not typically quantify the factors used to determine sample size may rely on judgment in evaluating sample results
Sampling plans for substantive procedures are designed to estimate the ______.
dollar amount of misstatement in an account balance
Monetary unit sampling uses individual ______ as the population.
dollars
Both statistical and nonstatistical sampling allows auditors to ______.
draw valid inferences about the population estimate population projected misstatement
When one sampling plan is used for testing a control and substantiating the dollar amount of an account balance it is called a(n)
dual purpose test
The risk of assessing control risk too low lessens the overall ______ of the audit.
effectiveness
The objective of tests of controls is to provide evidence about the design or operating _
effectiveness of internal control
When using MUS sampling ______.
efficient stratification of the sample is automatic special consideration must be given to accounts with negative balances
In difference estimation, the ______ is equal to the book value of the account plus or minus the projected misstatement.
estimated total audited value
The principle in unrestricted random sampling is ______.
every sampling unit has an equal chance of being selected
Selecting items from a population on an arbitrary basis is called ______ sample selection.
haphazard
When auditors arbitrarily select items from a population they are using
haphazard
In mean-per-unit sampling, the ______ misstatement is the difference between the client's book value and the estimated total audit value.
projected
Estimated total audited value - book value of the population =
projected misstatement
In ratio estimation, using the average misstatement in the sample, divided by the average book value in the sample, and multiplying it times the total population book value calculates the ______.
projected misstatement
The best estimate of misstatement in the population based upon sample results is the
projected misstatement
The estimate of the total amount of misstatement in the population called the
projected misstatement
Along with calculating the deviation rate and achieved upper deviation rate, auditors must also consider the _____ aspects of a deviation such as their nature and implications for other phases of the audit.
qualitative
A method of selecting items for inclusion in a sample that can be used in conjunction with either statistical or nonstatistical sampling is
random
A method of selecting items for inclusion in a sample is called
random selection
The projected misstatement = (Sample net misstatement ÷ Book value of sample) × Population book value when using
ratio
Nonsampling risk is ______,
the result of failing to apply appropriate audit procedures reduced through effective planning and supervision of audit engagements
Difference estimation is most appropriate when ______.
the size of misstatements does not vary significantly in comparison to book value
When a client's book value does not fall within the acceptance interval ______.
there is not enough evidence to conclude if there is a material misstatement sample results indicate the risk of material misstatement is too high
In tests of control, the upper deviation rate is called the ____
tolerable deviation rate
Auditors will test every item with a book balance of more than _____ _____ and other high risk items.
tolerable misstatement
Which of the following is always equal to or less than performance materiality?
tolerable misstatement
Factors used to determine the planned allowance for sampling risk in mean-per unit sampling include ______.
tolerable misstatement incorrect acceptance coefficient
In MUS sampling, Projected misstatement + Basic precision + Incremental allowance equals ______.
upper limit on misstatement
The MUS evaluation procedure involves calculating an estimate of the maximum amount of misstatement in the account which is called the
upper limit on misstatement
Mean-per-unit estimation, ratio estimation, and difference estimation are frequently used ______ sampling plans.
variables
Sequential sampling is most advantageous for samples with ______ population deviation rates.
very low
An item is eligible to be selected more than once in sampling ______ replacement.
with
Which of the following are NOT components of audit risk?
Projected risk Tolerable risk
If an actual (but unknown) deviation rate of 4 percent exists in the population, and the sample's deviation rate is 3 percent, the sampling error is ______.
1%
Through using systematic selection, auditors who want to examine 400 paid and cashed checks from a total population of 50,000 checks would select every ______ check.
125th
Auditors are sampling 150 items from a population of accounts receivables that totals $300,000. The sampling interval is
2000
If an account has a book value of $200 and an audited value of $140, the tainting is
30
The major differences between statistical and nonstatistical sampling in attributes sampling are the steps for ______.
determining sample size evaluating sample results
In mean-per-unit estimation the second stage of sample evaluation is to calculate an allowance for sampling risk and a(n) _____ _____ used to arrive at a statistical decision.
acceptance interval
Tolerable misstatement - (Populationsize×IncorrectacceptancecoefficientxSamplestandarddeviation)Populationsize×IncorrectacceptancecoefficientxSamplestandarddeviation ÷SamplesizeSamplesize = ______.
allowance for sampling risk
Performing test of controls is often done using
attribute sampling
Characteristics that provide evidence that a control was actually performed are called
attributes
The major differences between statistical and nonstatistical sampling in _____ sampling are the steps for determining sample size and evaluating sample results.
attributes
Selecting and evaluating some of the items from a population of audit relevance that is expected to be representative of some characteristic of the population is called
audit sampling
Projected misstatement = estimated total audited value -
book value of population
Statistical procedures typically used for substantive tests of details include ______ sampling plans.
classical variables monetary unit
Items with negative balances do not require special treatment (consideration) when using ______.
classical variables sampling
An estimate of the standard deviation of the population must be made in order to use ______.
classical variables sampling only
If the risk of assessing control risk too low is 0.05, the _____ level is 0.95.
confidence
In attributes sampling the _____ level is the complement of assessing control risk too low.
confidence
When using statistical sampling, auditors may calculate the allowance for sampling risk and the acceptance interval which is also referred to as the
confidence interval
Auditors need to specify the risk that the actual deviation rate exceeds the tolerable deviation rate, which is the risk of assessing ______.
control risk too low
Increases in the auditor's specification of the risk of assessing control risk too low and the tolerable deviation rate will ______ the sample size required for tests of controls.
decrease
To calculate the risk of incorrect acceptance for a substantive procedure, ______ risk must be separated into two components
detection
Increases in expected population deviation rates will ______ the sample size required for tests of controls.
increase
Audit firms use structured approaches to nonstatistical sampling that are based on statistical methods in order to ______.
increase consistency of sampling judgments throughout the firm
With a population size over 500, holding sampling risk and the allowance for sampling risk constant, as the population increases in size, the sample size will ______.
increase slightly
In attributes sampling, as the expected population deviation rate increases, the sample size ______.
increases
When using monetary unit sampling, auditors reduce the risk of incorrect rejection by ______ their estimate of expected misstatement.
increasing
Auditors generally will not accept sampling risk for any item that could materially misstate the population which are referred to as
individually significant
The components of audit risk are _____ risk, _____ risk, and ____ risk.
inherent, control, detection
The risk of assessing control risk too _____ lessens the overall effectiveness of the audit.
low
The sampling method that assumes a sample's average audited value will, for a certain sampling risk and allowance for sampling risk, represent the true audited value of the population is ______ estimation.
mean-per-unit
The sampling unit when using _____ unit sampling is each dollar of the book value of a population.
monetary
(Population book value × Reliability factor) ÷ (Tolerable misstatement - (Expected misstatement × Expansion factor)) is the calculation for sample size when using ______ sampling.
monetary unit
As an alternative to classical variables sampling methods for performing substantive tests of transactions or balances, auditors may use ______ sampling.
monetary unit
Monetary unit sampling ______.
most frequently uses a systematic selection approach is very frequently used in both electronic and manual form
In determining sample sizes for nonstatistical sampling, auditors use a _____ factor based on the combined assessment of inherent risk and control risk and their assessment of the risk that other substantive procedures will fail to detect a material misstatement.
reliability
The "zero misstatements" row is always used for obtaining the _____ factor needed to compute a monetary unit sampling size.
reliability
Both statistical and nonstatistical sampling ______.
require professional judgment can provide sufficient appropriate evidence
Auditors should be concerned with controlling this type of sampling risk when performing tests of controls because it relates to the effectiveness of the audit as a means of detecting material misstatements in the client's financial statements.
risk of assessing control risk too low
The possibility that the results of a sample will indicate that a balance of a particular account is not materially misstated when, in reality, it is materially misstated is ______.
risk of incorrect acceptance
Time and other costs are a consideration when setting the ______.
risk of incorrect rejection
The point estimate of the population deviation rate is often a reference to the
sample deviation rate
A random sample may not be representative of the population because the ______.
sample selected may not possess the same characteristics of the population physical representation of the population may differ from the actual population
A sampling plan in which the sample is selected in stages, with the need for each subsequent stage being conditional on the results of the previous stage is called stop-and-go or
sequential sampling
Ratio estimation is preferred when ______.
smaller accounts have smaller misstatements larger accounts have larger misstatements
When using MUS sampling ______.
special consideration must be given to accounts with negative balances efficient stratification of the sample is automatic
One factor that influences sample size in mean-per-unit estimation is the estimated variability among item values in the population. This variability is measured using ______.
standard deviation
When using MUS, auditors generally use a ______ selection approach.
systematic
In MUS, the percentage of misstatement in the account is known as the
tainting
This risk of assessing control risk too high relates to ______ of the audit process.
the efficiency