Understanding Sampling Risk and Audit Procedures: Quiz 10

School: Ateneo de Davao University - Course: FIN 310 - Subject: Accounting

QUIZ 10 The following are examples of nonsampling risk, except a.Failure to recognize an error. b.Obtaining an unrepresentative sample. c.Use of an audit procedure inappropriate to achieve a given objective d.Failing to evaluate results properly. The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the a.Effectiveness of the audit b.Efficiency of the audit c.Preliminary estimates of materiality level d.Tolerable misstatement Which of the following methods is most appropriate when performing test of controls? a.Stratified random sampling b.Variable sampling c.Unrestricted random sampling with replacement d.Attribute sampling It will be appropriate to audit all items that make up a class of transactions or account balance (100% examination), except a.When there is a significant risk of misstatement and other selection method do not provide sufficient appropriate audit evidence b.When the repetitive nature of a calculation or other process performed automatically by the client's computer information system (CIS) makes 100% examination cost effective. c.When the class of transactions or account balance consists of a large number of small value items d.When the class of transactions or account balance consists of a small number of large value items An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to a.Minimize the failure to detect errors and fraud b.Eliminate the risk of non-sampling errors c.Measure the sufficiency of evidential matter obtained d.Reduce the level of audit risk and materiality to a relatively low amount. To reduce sampling risk, the auditor should: a.Increase the extent of supervision b.Increase the extent of review c.Increase the sample size d.Properly plan the engagement The following are advantages of using statistical sampling, except a.Statistical sampling provides a means for mathematically measuring the degree of risk that results from examining only part of a population. b.Statistical sampling allows the auditor to measure the sufficiency of the evidential matter obtained. c.Statistical sampling allows the auditor to greatly reduce substantive testing. d.Statistical sampling aids in the design of an efficient sample.