Chapter 9 Sampling

1. Statistical sampling provides a technique for

a. Exactly defining materiality.
b. Greatly reducing the amount of substantive testing.
c. Eliminating judgment in testing.
d. Measuring the sufficiency of evidential material.

2. Statistical samples as compared to non-statistical samples permit the auditor to

a. Quantify and control sampling risk.
b. Eliminate non-sampling errors of every type.
c. Obtain smaller sample sizes in all cases.
d. Use less complex formulas than those required to evaluate non-statistical samples.

3. One of the causes of non-sampling error is

a. The use of inappropriate or ineffective audit procedures.
b. Failure to draw a random sample.
c. Failure to draw a representative sample.
d. The use of attributes sampling instead of variables sampling.

4. Sampling risk refers to the possibility that:

a. The auditor may use a less than optimal statistical method for the circumstances, e.g. difference
estimation instead of ratio estimation.
b. The auditor may fail to recognize an error that is included in the sample.
c. Even though a sample is properly chosen, it may not be representative of the population.
d. The confidence level and/or precision established by the auditor are not appropriate.

5. Auditors who prefer statistical to non-statistical sampling believe that the principal advantage of statistical
sampling flows from its unique ability to
a. Define the precision required to provide adequate satisfaction.
b. Provide a mathematical measurement of risk.
c. Establish conclusive audit evidence with decreased audit effort.
d. Promote a more legally defensible procedural approach.

6. One of the ways to reduce non-sampling risk is through

a. Proper supervision and instruction of the client’s employees.
b. Proper supervision and instructions of the audit team members.
c. The use of attributes sampling rather than variables sampling.
d. Controls which ensure that the sample drawn is random and representative.

7. The standard deviation of a sample will usually decrease with

a. A decrease in sample size.
b. The use of stratification.
c. An increase in desired precision.
d. An increase in confidence level.

8. Which of the following statements is not correct?

a. It is acceptable for auditors to use statistical sampling methods.
b. It is acceptable for auditors to use non-statistical sampling methods.
c. The primary benefit of statistical sampling methods is the quantification of sampling risk.
d. An advantage of using statistical sampling is that the cost/benefit ratio is always positive.

9. What is the major difference between statistical and non-statistical sampling in substantive testing?
 a. In non-statistical sampling, the determination of the sample size is ad hoc based upon the auditor’s
professional judgment.
b. In non-statistical sampling, the level of risk is not formally quantified, instead auditors use their
professional judgment.
c. The results of non-statistical sampling are not as reliable as those in statistical sampling.
d. Non-statistical sampling uses more randomized methods for sample selection and thus is more
reliable.

10. Which of the following statements is true?

a. The audit procedures will vary as a result of using either statistical or non-statistical sampling.
b. The audit procedures will be the same for either statistical or non-statistical sampling but they must
be performed differently for each.
c. Statistically, sampling requires quantitative audit procedures whereas non-statistical sampling
requires judgmental audit procedures.
d. The same audit procedures are performed in the same manner for either statistical or non-statistical
sampling.

11. 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 selection.
b. Haphazard selection.
c. Systematic selection.
d. Statistical selection.

12. In which of the following cases would the auditor be most likely to conclude that all of the items in an
account under consideration should be examined rather than tested on a sample basis?
Measurement of Tolerable Error Error Frequency is Expected To Be
a. Large Low
b. Small High
c. Large High
d. Small Low

13. In examining cash disbursements, an auditor plans to choose a sample using systematic selection with a
random start. The primary advantage of such a systematic selection is that population items
a. Which include errors will not be overlooked when the auditor exercises compatible reciprocal
options.
b. May occur in a systematic pattern, thus making the sample more representative.
c. May occur more than once in a sample.
d. Do not have to be pre-numbered in order for the auditor to use the technique.

14. Other factors remaining constant, audit risk is increased by an increase in:
a. Materiality.
b. The effectiveness of analytical procedures.
c. The risk of incorrect rejection.
d. Detection risk.

15. If all other factors in a sampling plan are held constant, changing the measure of tolerable error to a smaller
value would cause the sample size to be:
a. Smaller.
b. Larger.
c. Unchanged.
d. Indeterminable.
16. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high
relate to the
a. Efficiency of the audit.
b. Selection of the sample.
c. Effectiveness of the audit.
d. Audit quality controls.

17. Which type of sampling plan is most frequently used in testing control activities?
a. Attributes sampling.
b. Discovery sampling.
c. Probability proportional sampling.
d. Classical variables sampling.

18. Establishing the tolerable deviation rate requires

a. Statistical frequency probability tables.
b. Random number tables.
c. A computer program.
d. Auditor judgment.

19. The tolerable deviation rate has a significant effect on sample size. The relationship of tolerable deviation
rate to sample size is
a. Not determinable.
b. Inverse.
c. Direct.
d. Variable.

20. The acceptable risk of assessing control risk too low in relation to the sample size is
a. Direct.
b. Inverse.
c. Parallel.
d. Not defined.

21. The risk which the auditor is willing to take of accepting a control as being effective when it is not, is the
a. Tolerable deviation rate.
b. Acceptable risk of assessing control risk too low.
c. Estimated population deviation rate.
d. Finite correction factor.

22. The deviation rate the auditor will permit in the population and still be willing to reduce the assessed level
of control risk is:
a. Tolerable deviation rate.
b. Estimated population deviation rate.
c. Acceptable risk of assessing control risk too low.
d. Sample deviation rate.

23. Statistical sampling may be applied to test controls when a client’s control procedures:
a. Depend primarily on segregation of duties.
b. Are carefully reduced to writing and are included in client accounting manuals.
c. Leave an audit trail as evidence of compliance.
d. Enable the detection of fraud.

24. Which of the following factors is generally not considered in determining the sample size for a test of
controls?
a. Population size.
 b. Risk of assessing control risk too low.
c. Tolerable rate.
d. Expected population deviation rate.

25. When sampling for attributes, which of the following would decrease sample size?
Risk of Assessing Control Risk Expected Population
Too Low Tolerable Rate of Deviation Deviation Rate
a. Increase Decrease Increase
b. Decrease Increase Decrease
c. Increase Increase Decrease
d. Increase Increase Increase

26. The tolerable occurrence rate for a control test

a. Directly varies with the sample size.
b. Is generally lower than the expected deviation rate.
c. Is not a factor to consider in determining the sample size.
d. Is compared to the expected deviation rate to decide whether sampling will be performed.

27. An auditor plans to test a sample of 20 checks for counter signatures as prescribed by the client’s control
procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider
the reasons for this limitation and
a. Evaluate the results as if the sample size had been 19.
b. Treat the missing check as a deviation for the purpose of evaluating the sample.
c. Treat the missing check in the same manner as the majority of the other 19 checks, i.e.
countersigned or not.
d. Choose another check to replace the missing check in the sample.

28. Although mathematically based, statistical sampling does not replace audit judgment. In utilizing statistical
sampling techniques, the auditor must apply judgment in all but which of the following tasks?
a. Selecting a tolerable rate of error.
b. Determining an acceptable risk of assessing control risk too low.
c. Calculating the actual error rate.
d. Assessing the materiality of control weakness.

29. If a selected random number matches the number of a voided voucher, the voucher ordinarily should be
replaced by another voucher in the sample if the voucher
a. Constitutes a deviation.
b. Cannot be located.
c. Has been properly voided.
d. Represents an immaterial peso amount.

30. Which is most likely to have more serious consequences, assessing control risk as too high or too low, and
why?
a. Too high, because too much reliance will be put on weak controls, increasing overall audit risk.
b. Too high, because audit efficiently and consequently audit reliability will be inhibited.
c. Too low, because too much reliance will be put on weak controls, increasing overall audit risk.
d. Too low, because audit efficiency and consequently audit reliability will be inhibited.

31. As a result of tests of controls, an auditor under-assessed control risk and decreased substantive testing.
This under-assessment occurred because the true occurrence rate in the population was
a. Less than the risk of under-assessment in the auditor’s sample.
b. Less than the occurrence rate in the auditor’s sample.
c. More than the risk of under-assessment in the auditor’s sample.
d. More than the occurrence rate in the auditor’s sample.
32. Which of the following sampling plans would be designed to estimate a numerical measurement of a
population, such as a peso value?
a. Numerical sampling.
b. Discovery sampling.
c. Sampling for attributes.
d. Sampling for variables.

33. Which of the following statements is an advantage of classical variables sampling?

a. If no errors are expected, classical variables sampling will result in a smaller sample size than
probability-proportional-to-size sampling.
b. A classical variables sampling plan can begin before the completed population is available.
c. Classical variables sampling may result in a smaller sample size than probability-proportional-to-
size sampling if there are many differences between recorded and audited amounts.
d. Classical variables sampling does not require recorded values for individual sampling units.

34. Which of the following situations would increase sample size? A decrease in:
a. Risk of incorrect rejection.
b. Estimated population standard deviation.
c. Expected frequency of errors.
d. Tolerable error.

35. To determine the number of items to be selected in a sample for a particular substantive test of details, the
auditor should consider all of the following except:
a. Tolerable error.
b. Expected error.
c. Allowable risk of incorrect acceptance.
d. Characteristics of the population.

36. An auditor is primarily concerned with substantial overstatements of accounts receivable balances and
expects few, if any, errors. In an effort to concentrate on the large peso values, the auditor would logically
employ
a. Ratio estimation.
b. Probability proportional to size sampling.
c. Difference estimation.
d. Non-statistical sampling.

37. PPS sampling is less efficient if

a. Computerized account balances are being audited.
b. Statistical inferences are to be made.
c. The audit objective is oriented to understatement.
d. The account contains a large number of transactions.

38. In comparison with classical variables sampling, which of the following is an advantage of PPS sampling?
a. PPS sampling automatically results in a stratified sample.
b. PPS sampling results in a smaller sample size if many differences are expected between audited
and recorded amounts.
c. PPS sampling is particularly appropriate when understatement errors are expected.
d. PPS sampling is less likely to overstate the allowance for sampling risk when errors are found in
the sample.

39. PPS sampling is most appropriate when the auditor

a. Anticipates understatement errors.
b. Anticipates overstatement errors.
 c. Expects no errors.
d. Has assessed control risk at the maximum.

40. Sampling results could lead the auditor to believe erroneously that the account contains more peso error
than can be tolerated. Which of the following corresponds to the preceding statement?
a. The risk of incorrect acceptance.
b. The risk of incorrect rejection.
c. Estimation sampling.
d. Projected misstatement.

41. In assessing sampling risk, the risk of incorrect rejection of an account balance relates to the
a. Efficiency of the audit.
b. Selection of the audit.
c. Effectiveness of the audit.
d. Audit quality control.

42. The risk of incorrect acceptance relates to the

a. Effectiveness of the audit.
b. Efficiency of the audit.
c. Preliminary estimate of materiality.
d. Allowable risk of tolerable error.

43. Several conditions must be met before an auditor applies either difference or ratio estimation. Which of the
following is not one of these conditions?
a. Each population item must have a recorded book value.
b. The auditor must not expect understatement error.
c. Total population book value must be known and must correspond to the sum of all individual
population items.
d. Expected differences between audited and recorded book values must not be too rare.

44. Although many aspects of sampling techniques are fairly mechanical in their approach, ordinarily the most
subjective part of the techniques is the auditor’s decision on:
a. Where the sample selection should start.
b. Tolerable misstatement and acceptable levels of risk.
c. Population item heterogeneity.
d. The allowance for sampling risk.

45. PPS sampling will result in what type of sample items being selected?
a. Highly representative of the population because of its wholly randomized.
b. A higher proportion of small value items than large value items because of the sampling interval
used.
c. A higher proportion of higher value items than small value items because of the sampling interval
used.
d. A biased sample means that may not be representative of the population.

46. Sampling is generally used when

a. Controls depend primarily on adequate segregation of duties.
b. Evidence is observable but not documented.
c. Controls do not leave a trail of observable evidence.
d. All of the above.

47. Statement A: Attributes sampling is generally used to reach a conclusion about a population peso amount
while variables sampling is generally used to reach a conclusion about rate of deviation.
Statement B: Audit risk cannot be totally eliminated by 100% testing due to human error.
 a. Both statements are true.
b. Both statements are false.
c. Statement A is true and Statement B is false.
d. Statement B is true and Statement A is false.

48. Statement A: Control risk and inherent risk are audit risk components controllable by the auditor.
Statement B: If both control risk and inherent risk are high, an auditor can decrease detection risk by
increasing sample size.
a. Both statements are true.
b. Both statements are false.
c. Statement A is true and Statement B is false.
d. Statement B is true and Statement A is false.

49. Statement A: Sampling risk varies directly with sample size.

Statement B: Non-sampling risk is due to human error made by the client’s staff.
a. Both statements are true.
b. Both statements are false.
c. Statement A is true and Statement B is false.
d. Statement B is true and Statement A is false.

50. Statement A: Attributes sampling plan usually quantify the risk of assessing control risk too high.
Statement B: Auditor varies the risk for individual controls, assigning a higher acceptable risk to controls
deemed critical.
a. Both statements are true.
b. Both statements are false.
c. Statement A is true and Statement B is false.
d. Statement B is true and Statement A is false.

51. What sampling selection methods should auditor use with extreme caution?
a. Random number sampling and block sampling.
b. Block sampling and haphazard sampling.
c. Stratified sampling and haphazard sampling.
d. Block sampling and stratified sampling.

52. Statement A: Non-statistical sampling is not guided by statistical theory but experience and by prior
knowledge and current information about the client.
Statement B: The degree of audit assurance is determined after the auditor obtains an understanding of
internal controls.
a. Both statements are true.
b. Both statements are false.
c. Statement A is true and Statement B is false.
d. Statement B is true and Statement A is false.

53. Statement A: Key peso items are the items an auditor plans to test 100%.
Statement B: Sample sizes are larger when an auditor specifies a lower acceptable risk of assessing control
too low.
a. Both statements are true.
b. Both statements are false.
c. Statement A is true and Statement B is false.
d. Statement B is true and Statement A is false.

54. Statement A: In general, a lower tolerable rate of deviation is appropriate when an auditor assesses a high
control risk.
Statement B: If the expected population deviation rate exceeds the tolerable rate, it means control is
effective.
a. Both statements are true.
b. Both statements are false.
c. Statement A is true and Statement B is false.
d. Statement B is true and Statement A is false.