0 valutazioniIl 0% ha trovato utile questo documento (0 voti)

4 visualizzazioni171 pagineAuditing Theory

Feb 25, 2020

© © All Rights Reserved

0 valutazioniIl 0% ha trovato utile questo documento (0 voti)

4 visualizzazioni171 pagineSei sulla pagina 1di 171

OBJECTIVE:

PSA 530. Sec 5 - DEFINITIONS

PSA 530. Sec 5 - DEFINITIONS

AUDIT UNIVERSE

PSA 530.5(b & c): Audit Sampling - DEFINITIONS

erroneous conclusions.

PSA 530. Sec 5 – DEFINITIONS

Non-statistical

sampling does not

considered (i) & (ii).

PSA 530. Sec 5 – DEFINITIONS

Cannot be eliminated

due to inherent

limitations of audit.

PSA 530. Sec 5 – DEFINITIONS

PSA 530. Sec 5 – DEFINITIONS

PSA 530. REQUIREMENTS

PSA 530. REQUIREMENTS

PSA 530. REQUIREMENTS

Audit Sampling: KEY DECISIONS

Which population should be tested?

Population?

Sample size?

Selection?

Evaluation?

Audit Sampling: DESIGN

AUDIT OBJECTIVES

STRATIFICATION

Characteristics of Good Audit Samples

1. Representative: estimates the true

population characteristics as

accurately as possible.

2. Corrective: sample will locate as many error items as possible

so these can be corrected.

3. Preventive: sampling method gives audit clients no idea what

items will be selected

4. Protective: attempts to include the maximum number of high

value items in the sample.

DEALING with SAMPLING RISKS

The auditor can eliminate sampling risks by testing the

entire population. However, such testing usually not

possible. Auditor reduces sampling risk to an

acceptably low level by making a sample more

representative of the population by:

- Increasing the sample size

- Using appropriate sample selection method

PSA 530. Sec 5 –SAMPLING RISK

with this type of erroneous affects audit efficiency as it would

conclusion because it affects audit usually lead to additional work to

effectiveness & is more likely lead establish that initial conclusions

to an inappropriate audit opinion. reached were incorrect.

SAMPLING Alpha Risk Beta Risk

Type 1 Misstatement Type II Misstatement

Sampling Assessing control risk Assessing control risk

risks too high too low

Controls are: Ineffective when they Effective when they

are actually effective are actually not

(ineffective)

Control Under reliance Over-reliance

reliance

SAMPLING Alpha Risk Beta Risk

Type 1 Misstatement Type II Misstatement

TEST OF DETAILS (TOD)

Sampling Incorrect rejection Incorrect acceptance

risks

Material Exist when in fact it Does not exist when

misstatement does not in fact it does

Affects audit Efficiency Effectiveness

(Additional work/ Inappropriate audit

procedures) opinion

Audit Sampling: DOES NOT INCLUDE

Tracing several transactions through the

accounting system to gain an understanding

of the internal control structure.

Walk through

Audit Sampling: DOES NOT INCLUDE

procedure that does not leave an audit trail, such as

observing the physical inventory count.

Test of Controls (TOC) Test of Details (TOD)

Extent 2. Specific items (non-representative)

Ex. High value or key items (suspicious, high risk)

of All items over a certain amount ex. >P1M

Selection Certain control activities/nature of entity

3. Audit sampling (representative)

Ex. < 100%, sampling units-chance of selection

Purpose of AUDIT SAMPLING: TEST OF CONTROLS

Obtain evidence about client’s CONTROL OBJECTIVE

on compliance:

Sample:

Usually from a class of transactions

(population) such as:

* Cash receipts

* Cash disbursements

* Purchases (inventory additions)

* Inventory issues

* Sales on credit

* Expenses details

Purpose of AUDIT SAMPLING: TEST OF CONTROLS

Purpose of AUDIT SAMPLING: TEST OF DETAILS

Obtain evidence about ASSERTIONS related to

Financial statement account balances:

Sample:

Usually from items in an asset/

Liability balance (population) such as:

* Accounts Receivable

* Loans receivable/payable

* Inventory

* CAPEX (PPE)

* Investments

* Accounts Payable

Test of DETAILS: Examples

Test of DETAILS: Examples

SUMMARY

SAMPLING RISKS NON-SAMPLING RISKS

Risk that auditor reaches an incorrect Risk that that audit tests do not

conclusion because the sample is not uncover existing exceptions in the

representative of the population sample

Inherent part of audit sampling The auditor’s failure to recognize

exceptions; inappropriate or

ineffective audit procedures

Controlled by: Controlled by:

• Determining the appropriate sample size • Training and supervision

•Ensuring that all items have an equal • Reasonable working conditions

opportunity of selection • Effort

• Mathematically evaluating sample results

10 STEPS OF AUDIT SAMPLING PROCESS

1 Define the objective (purpose) of test

2 Define the deviation or misstatement

3 Identify the relevant audit universe/population

4 Determine the relevant sampling unit

5 Select the appropriate sampling approach

6 Determine the sufficient sample size

7 Select the representative sample items

8 Perform the testing and evaluate evidence

9 Evaluate the test results and reach conclusion

10 Complete documentation

10 STEPS OF AUDIT SAMPLING PROCESS

1 Define the objective (purpose) of test

The test objective is based on the ROMM at assertion level that guide

in designing the appropriate audit procedures necessary to achieve

the objective.

10 STEPS OF AUDIT SAMPLING PROCESS

2 Define the deviation or misstatement

misstatement by reference to test objective.

TOC, a deviation is a departure from adequate control performance

Ex. Sales invoice not supported by credit approval report & a

shipping document.

the amount the auditor determines to be appropriate

Ex. Recorded receivable relating to fictitious sale or from a

prematurely recognized sale

10 STEPS OF AUDIT SAMPLING PROCESS

3 Identify the relevant audit universe/population

Ex. A/R balance = P1 M, Customers = 1,000, Sales invoices = 5,000

Relevant audit universe/population:

Any of the entire A/R, customers or sales invoices

Auditor identifies the relevant population & its characteristics such as:

A. direction of testing

TOD, stratification or value weighted selection (monetary unit

sampling) – direction of misstatement.

TOC, direction of deviations determines the relevant population

B. completion of population

Completeness is verified by its Boundaries (beg. & end) and Totality

10 STEPS OF AUDIT SAMPLING PROCESS

3 Identify the relevant audit universe/population

Strata Average Amount No. of Customers Sample Size

1 Over P1,000, 000 50 50

2 P100,000 – P1,000,000 200 50

3 Below P100,000 500 25

Total 750 125*

•If not stratified, this sample size would have been greater in order to reduce sampling risk

•Assumption:

Presence of misstatement is projected for each stratum

10 STEPS OF AUDIT SAMPLING PROCESS

4 Determine the relevant sampling unit

If the population is 1,000 customers, each customer = sampling unit

If the population is 5,000 sales invoices, 1 sales invoice = sampling unit

SAMPLING APPROACHES – Advantages & Disadvantages

STATISTICAL SAMPLING NON-STATISTICAL SAMPLING

Advantages:

• More effective due to aid of • Easy to apply & less costly

statistics/mathematics •Can be as effective as statistical

• More objective if appropriate judgment applied.

Disadvantages:

• Overvalue the evidence •Less objective

• Reduces auditor’s skepticism •Relies exclusively on professional

•Increased cost due to: judgment to:

- training auditors - Determine sampling size

- sampling software - Evaluate sample results

- Estimate sampling risk

10 STEPS OF AUDIT SAMPLING PROCESS

5 Select the appropriate sampling approach (OVERVIEW)

Sampling

e

10 STEPS OF AUDIT SAMPLING PROCESS

5 Select the appropriate sampling approach (OVERVIEW)

Attributes Sampling in TOC

Regular Conclusion is reached about a population in terms of a rate (frequency) of occurrence

based on a fixed sample size.

Ex. Sample Check Voucher – examined the signatures, evidencing approvals

# of Missing signatures = deviations, used to estimate the overall rate of exceptions

for the entire (population) check vouchers

Sampling plan to determine enough sample size (fixed sample size) required to have a

Discovery

probability of discovering at least one (critical) deviation

Expected deviation rate = zero or near zero, any deviation detected results in REJECTION

of the sampling plan

The result of the previous stage determines the need to GO to next stage.

Stop-or-go If it is poor or ineffective --- continue to next stage

If it is good or effective --- does it justify reliance?

10 STEPS OF AUDIT SAMPLING PROCESS

5 Select the appropriate sampling approach (OVERVIEW)

Statistical Variables Sampling for TOD

Classical Generally, answers the following questions:

(1) How much?

(2) Is the account materially misstated?

CARRYING VALUE - AUDITED Amounts =DIFFERENCE (sample

misstatement)

3 variations: MPU, Difference Approach or Ratio Approach

Monetary Sample size, selection & results evaluation are terms of monetary

Unit amounts and is appropriate for testing:

Sampling - Assets

- Income

10 STEPS OF AUDIT SAMPLING PROCESS

6 Determine the sufficient sample size

to an acceptably low level.

accept is inversely related to sample size.

the sampling risk, the the sample size to achieve level of confidence.

7 Select the representative sample items

10 STEPS OF AUDIT SAMPLING PROCESS

7 Select the representative sample items

10 STEPS OF AUDIT SAMPLING PROCESS

7 Select the representative sample items: Sample Selection Methods

7 Select the representative sample items: Sample Selection Methods

7 Select the representative sample items: Sample Selection Methods

The auditor calculates an interval &

then selects the items for the sample

based on the size of the interval.

dividing the population size by the

number of sample items desired.

10 STEPS OF AUDIT SAMPLING PROCESS

7 Select the representative sample items

The auditor calculates an interval & by dividing the population

then selects the items for the sample size by the number of

based on the size of the interval. sample items desired.

10 STEPS OF AUDIT SAMPLING PROCESS

7 Select the representative sample items

10 STEPS OF AUDIT SAMPLING PROCESS

7 Select the representative sample items

10 STEPS OF AUDIT SAMPLING PROCESS

8 Perform the testing and evaluate evidence

Auditor shall perform audit procedures, appropriate to the purpose, on

each item selected, and evaluate the audit evidence obtained.

Voided sample - not applicable to the selected item

Auditor shall perform procedure on a replacement item

Ex. Voided check is selected while testing payment authorization.

Missing or Lost Sample

10 STEPS OF AUDIT SAMPLING PROCESS

9 Evaluate the test results and reach conclusion

Whether the sampling is statistical or non-statistical, the auditor applies

professional judgment in evaluating the results and reaching an overall

conclusion by considering:

1. Nature, causes & effect of deviations and

misstatements;

Investigate whether the deviations or misstatements

is systematic or indicate the possibility of FRAUD,

which may require extended audit procedures.

2. Deviations and misstatements.

9 Evaluate the test results and reach conclusion

Test of Controls (TOC) – Deviations or Misstatements

+ Allowance for Sampling Risk

during 2018. The auditor designed a statistical sample that would provide 1% risk

of assessing control risk too low (99% confidence level) that not more than 5% of

the sales invoices lacked approval, with allowance for sampling risk of 3.5%. The

auditor estimated from pilot testing performed that about 1.5% of the check

vouchers lacked approval. A sample of 100 check vouchers was examined & 4 of

them lacked approval.

SDR is 4% (4/100); PDR = 7.5% (4% + 3.5%)

9 Evaluate the test results and reach conclusion

Test of Controls (TOC) – Deviations or Misstatements

+ Allowance for Sampling Risk

(1) Compare PDR to TDR (tolerable deviation rate)

Increase the level of assessed of control risk (CR is high) because the TDR (5%)

was less than the PDR (7.5%)

(2) Compare SDR to EDR (expected deviation rate)

Increase the level of assessed of control risk (CR is high) because the EDR

(1.5%) was less than the SDR (4%)

9 Evaluate the test results and reach conclusion

Test of Details (TOD) – Calculating Sample Misstatements

Projected misstatement (MLE-most likely error) is the misstatement that the

auditor estimates to be in the population & is calculated by adjusting

the sample misstatement by an allowance for sampling risk.

cause the auditor to believe that misstatement is material,

in absence of further audit evidence that no material

misstatement exists.

9 Evaluate the test results and reach conclusion

Test of Details (TOD) – Calculating Sample Misstatements

In TOD, an unexpectedly high sample misstatement may cause the auditor to believe

that misstatement is material, in absence of further audit evidence that no material

misstatement exists.

EPM [estimated population misstatement] = PM (Projected Misstatement)

+ AM (Anomalous Misstatement)

The closer the EPM is to tolerable misstatement, the more likely that actual

population misstatement (APM) may exceed the tolerable misstatement.

When EPM > Tolerable Misstatement, the sample does not provide reasonable

basis for conclusion.

If the projected misstatement is > than the auditor’s expectations of

misstatement used to determine the sample size, the auditor may conclude

that there is an unacceptable sampling risk that the APM exceeds the

tolerable misstatement.

9 Evaluate the test results and reach conclusion

Test of Details (TOD) – Calculating Sample Misstatements

reasonable basis for conclusions about the population that has been

tested, the auditor may:

the potential for further misstatements and necessary adjustments

-Tailor the nature, timing and extent of further audit procedures to

achieve the required assurance.

In auditing Accounts Payable, an auditor has accumulated the following data:

No. of Accounts Carrying Amt (CA) Audited Amt (AA) Misstatements

Population 4,100 P 5,000,000 ?? ??

Sample 200 P 250,000 P 300,000 P 50,000

multiply that average amount by the population size.

EPAA = Population size x Average Audited Amount

= P 6,150,000

computed as: 4,100 x (P300,000 / 200)

Projected Misstatement = P5,000,000 – P6,150,000

= P1,150,000 understatement

In auditing Accounts Payable, an auditor has accumulated the following data:

No. of Accounts Carrying Amt (CA) Audited Amt (AA) Misstatements

Population 4,100 P 5,000,000 ?? ??

Sample 200 P 250,000 P 300,000 P 50,000

Difference Approach

EPAA is calculated by an average difference between audited & recorded

amounts of the sample items & projects that average difference to

the population.

Average difference : Average CA – Average AA

= 250 = [250,0000/200] – [300,000/200]

Projected Misstatement = 4,100 accounts x 250 (average difference)

= P1,025,000 understatement

EPAA = P5,000,000 + P1,025,000 = P6,025,000

In auditing Accounts Payable, an auditor has accumulated the following data:

No. of Accounts Carrying Amt (CA) Audited Amt (AA) Misstatements

Population 4,100 P 5,000,000 ?? ??

Sample 200 P 250,000 P 300,000 P 50,000

Ratio Approach

EPAA is calculated by multiplying the recorded amount of population by the

same ratio.

EPAA = [Sample AA/Sample CA] x Population CA

= P 6,000,000 = [P300,000/P250,000] x P5,000,000

= P1,000,000 understatement

Test of Details (TOD) – Calculating Sample Misstatements: MUS

(2) Add up the misstatement %s, netting overstatements & understatements

(3) Calculate the average % misstatement per item sampled by dividing the

total misstatement %s by the number of all items sampled.

(4) Multiply the average % misstatement by the total representative

population monetary value. This results in the projected misstatements

for the sample.

Carrying amt (1) Audited amt (2) Misstatement (1-2) Misstatements % [1-2]/2

P 1,500 P 1,200 P 300 25.00%

P 3,500 P 3,000 P 500 16.67%

P 6,000 P 6,500 - P 500 - 7.69%

Test of Details (TOD) – Calculating Sample Misstatements

Monetary Unit Sample (MUS)

Carrying amt (1) Audited amt (2) Misstatement (1-2) Misstatements % [1-2]/2

P 1,500 P 1,200 P 300 25.00%

P 3,500 P 3,000 P 500 16.67%

P 6,000 P 6,500 - P 500 - 7.69%

Total % of misstatement 33.98%

Average % misstatement [33.98% / 100 sample size) 0.3398%

Projected Misstatement [0.3398% x 250,000 population] P 849.50

10 STEPS OF AUDIT SAMPLING PROCESS

10 Complete documentation

True or False

PSA 530

Audit Sampling

1. The most effective way to control sampling

risk is to increase the sample size.

2. For tests of details, the auditor makes an

assessment of the expected misstatement in

the population. If the expected misstatement

is high, 100% examination or use of a large

sample size may be appropriate when

performing tests of details.

3. Statistical sampling is used when an auditor

chooses to examine all purchases of

equipment exceeding P 100,000.00 and to

test the remaining items by analytical

procedures.

4. Audit sampling implies the application of

audit procedures to 100% of items in the

population to use as a basis for making valid

inferences about the characteristics of the

population as whole and examining every

transaction.

5. The only way to know with certainty whether

a sample is representative is to subsequently

audit the entire population.

6. If the expected rate of deviation is

unacceptably high, the auditor will normally

decide not to perform tests of controls.

7. The decision whether to use a statistical or

non-statistical sampling approach is a matter

for the auditor’s judgment; however, sample

size is not a valid criterion to distinguish

between statistical and non-statistical

approaches.

8. The level of sampling risk that the auditor is

willing to accept affects the sample size

required. The lower the risk the auditor is

willing to accept, the lower the sample size

will need to be.

9. Non-statistical sampling permits auditors to

be more subjective, to be vague about risk &

materiality & less rigid approach to unique

audit problems.

10. The sample size can be determined by the

application of a statistically-based formula or

through the exercise of professional judgment.

11. The more the auditor is relying on other

substantive procedures (TOD or SAP) to

reduce to an acceptable level the detection

risk regarding a particular population, the

less assurance the auditor will require from

sampling and, therefore, the larger the

sample size.

12. The auditor’s assessment of the risk of

material misstatement is affected by inherent

risk, audit risk and control risk.

13. For small populations however, audit

sampling may not be as efficient as

alternative means of obtaining sufficient

appropriate audit evidence.

14. The greater the level of assurance that the

auditor desires that the results of the sample

are in fact indicative of the actual incidence

of deviation in the population, the smaller

the sample size needs to be.

15. The lower the tolerable rate of deviation, the

larger the sample size needs to be.

16. PSA 570 provides guidance on the means

available to the auditor for selecting items for

testing, of which audit sampling is one

means.

17. The objective of the auditor when using audit

sampling is to provide a reasonable basis for

the auditor to draw conclusions about the

population from which the sample is

selected.

18. Audit risk means that the auditor’s

conclusion based on a sample may be

different from the conclusion if the entire

population were subjected to the same audit

procedure.

19. If the auditor is unable to apply the designed

audit procedures, or suitable alternative

procedures, to a selected item, the auditor

shall treat that item as a material

misstatement from the prescribed control, in

the case of tests of controls, or a

misstatement, in the case of tests of details.

20. In the extremely rare circumstances when the

auditor considers a misstatement or deviation

discovered in a sample to be an anomaly, the

auditor shall obtain a high degree of certainty

that such misstatement or deviation is not

representative of the population.

21. Haphazard selection is a type of value-

weighted selection in which sample size,

selection and evaluation results in a

conclusion in monetary amounts.

22. The objective of stratification is to reduce the

variability of items within each stratum and therefore

allow sample size to be reduced without increasing

sampling risk.

23. Block selection cannot ordinarily be used in

audit sampling because most populations are

structured such that items in a sequence can

be expected to have similar characteristics to

each other, but different characteristics from

items elsewhere in the population.

24. For large populations, the actual size of the

population has little, if any, effect on sample

size. Thus, for small populations, audit

sampling is often not as efficient as

alternative means of obtaining sufficient

appropriate audit evidence.

25. Factors relevant to the auditor’s consideration

of the expected misstatement amount include

the extent to which item values are determined

subjectively, the results of risk assessment

procedures, the results of tests of control, the

results of audit procedures applied in prior

periods, and the results of other substantive

procedures.

MULTIPLE CHOICES

1. A sample in which the characterisitics in the

sample are the same as thos eof the populations

is a (an)

a. Random sample

b. Variables sample

c. Attributes sample

d. Representative sample

2. Non-sampling errors occur when audit tests do

not uncover existing exceptions in the

a. Population

b. Sample

c. Planning stage

d. Financial statements

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. One of the ways to eliminate non-sampling risk is

through

a. Proper supervision and instruction of the client’s

employees

b. Proper supervision and instruction of the audit

team

c. The use of attributes sampling rather than variables

sampling

d. Controls which ensure that the sample drawn is

srandom and representative

5. Sampling risk or error is an inherent part of

sampling that results from

a. Inappropriate audit procedures

b. Failure to recognize exceptions

c. Testing less than the entire population

d. Weaknesses in client’s internal control system

6. One of the ways to reduce sampling risk is to

a. Use an appropriate method of selecting sample

items from the population

b. Carefully design the audit procedures to be used

c. Provide proper supervision and instruction to the

audit team

d. Use variables sampling rather than attribute

sampling

7. 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.

8. The most common method used of performing

statistical tests of transaction is

a. Variables sampling

b. Attribute sampling

c. Judgment sampling

d. Random selection of samples

9. Which of the following statements is a valid

criticism of the use of non-statistical sampling

methods?

a. Many audit tests, such as footing of journals, must be

performed outside a statistical context.

b. The cost of performing random selection of testing

often exceeds the benefit.

c. Non-statistical sampling does not differ substantially

from statistical sampling method.

d. Conclusions may be drawn in more precise ways when

using statistical sampling methods.

10. A sample in which every possible combination of

items in the population has an equal chance of

constituting the sample is

a. Representative sample

b. Statistical sample

c. Random sample

d. Judgment sample

11. Which of the following statements regarding

documentation of the sample selection process is not true?

a. Regardless of the method used in selecting a random sample, it

is necessary to have proper documentation.

b. When comparing statistical sampling to judgmental sampling it

is more important that statistical sampling be properly

documented because of its mathematical nature.

c. Minimum documentation would include sufficient information

to permit the reproduction of the sample at a later date.

d. For documentation, it is permissible for the auditor to include

in the working papers a copy of the table used, with the

random numbers identified.

12. Which of the following is not an advantage of

using computerized selection of random

numbers over use of a random number table?

a. Time saving

b. Reduced likelihood of auditor error

c. Automatic documentation

d. Correspondence of the numbers with the

population is not required.

13. The process which requires the calculation of an

interval and then selects the items based on the

size of the interval is

a. Statistical sampling

b. Random selection

c. Systematic selection

d. Computerized selection

14. The advantage of systematic selection is

a. It is easy to use

b. There is limited possibility of it being biased

c. It is unnecessary to determine if the population is

arranged randomly

d. All there of the above

15. 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

16. When the auditor intends to evaluate a sample

statistically, the only acceptable selection

method is

a. Probabilistic selection

b. Block selection

c. Haphazard selection

d. Judgmental selection

17. Since auditors are interested in the occurrence

of exceptions in populations, they refer to the

occurrence rate as

a. Exceptions rate

b. Populations rate

c. Deviation rate

d. Confidence level

18. If an auditor, without statistical sampling, selects

a sample of one hundred items from a

population and finds two exceptions, the auditor

a. Can conclude that the sample deviation rate is 2%

b. Can conclude tha the population deviation rate is

2%

c. Can conclude that the highest deviation rate

expected in the population.

d. Cannot make any conclusions about either the

sampe or the population.

19. The degree to which the auditor is justified in

believing that the estimate based on a random

sample will fall within a specified range is called:

a. Sampling risk

b. Non-sampling risk

c. Confidence level

d. Precision

20. Using random numbers to select a sample:

a. Is required for variables sampling plan

b. Is likely to result in an unbiased sample

c. Results in a representative sample

d. Allows auditors to use smaller samples

21. In sampling application, the standard deviation

represents a measure of the:

a. Expected error rate

b. Level of confidence required

c. Degree of data variability

d. Extent of precision achieved

22. In sampling application, the standard deviation

represents a measure of the:

a. Expected error rate

b. Degree of data variability

c. Level of confidence required

d. Extent of precision achieved

23. If all other sample size planning factors were

exactly the same in attributes sampling, changing

the confidence level from 95% to 90% and

changing the desired precision from 2% to 5%

would result in a revised sample size which would

be:

a. Smaller

b. Unchanged

c. Indeterminate

d. Larger

24. Auditors employ the concept of precision in audit

sampling contexts. In this context, precision is

a. A characteristic of the population at hand

b. A measure of the accuracy with which one has

generated sample estimates. Desired precision must be

established before the sample is obtained and

evaluated.

c. Evaluated independently of reliability in a given sample.

d. Important for evaluating variables samples, but not

attribute samples.

25. All of the output from a single source is called a:

a. Population

b. Sample

c. Process

d. Subgroup

26. Considerations for sample design, size & selection of

items for testing, except:

a. When designing an audit sample, the auditor shall

consider the purpose of the audit procedure and the

characteristics of the population from which the sample will

be drawn.

b. The auditor shall determine a sample size sufficient to reduce

sampling risk to an acceptably low level.

c. The auditor shall select items for the sample in such a way that

each sampling unit in the population has a chance of selection.

d. The auditor shall perform audit procedures, appropriate to the

purpose, on each item selected.

27. Evaluate whether each of the following statements

qualifies as sampling:

I. Test performed on 100% of the items within the population

II. Selecting items over a certain amount

III. Selecting items for the total population on the basis that was

expected to be representative

b. III does not qualify d. All of the above do not qualify

28. In which of the following cases the auditor is unlikely to

perform 100% examination of items to obtain sufficient

appropriate audit evidence?

a. The population constitutes a small number of large value

items

b. There is a significant risk & other means do not provide

sufficient appropriate audit evidence

c. Testing control activities about the approval of expenditures

d. The use of cost effective computer assisted audit techniques

29. Specific selection of items for testing may be

appropriate in the following cases, except:

a. High value or key items that are suspicious, unusual,

particularly risk-prone or that have a history or error.

b. All items less than the performance materiality level

c. All items above the performance materiality level

d. Items to obtain information about matters such as the nature

of the entity or the nature of the transactions.

30. Why do auditors generally use a sampling approach to

evidence gathering?

a. Auditors must balance the cost of the audit with the need for

precision

b. Auditors are experts & do not need to look at much to know

whether the F/S are correct or not

c. Auditors must limit their exposure to their client to maintain

independence.

d. Auditor’s relationship with the client is generally, adversarial,

so that auditor will not have access to all the F/S information

of the company.

31. Which of the following would cause a sampling error in

an audit of F/S?

a. Selecting inappropriate audit procedures

b. Applying audit procedures improperly

c. Interpreting results inappropriately

d. Selecting a non-representative sample

32. Which of the following is true concerning sampling risk?

a. It can be reduced to zero in statistical sampling but not

in non-statistical sampling

b. It includes the risk of error due to the auditor’s lack of

training

c. It exists in both statistical and non-statistical sampling

d. It cannot be measured.

33. At times sample may indicate in the case of TOC, that

controls are more effective than they actually are. This

situation illustrates the risk of

a. Over-reliance

b. Incorrect precision

c. Under-reliance

d. Incorrect rejection

34. At times sample may indicate in the case of TOD, that a

material misstatement does not exist when in fact it

does. This situation illustrates the risk of

a. Over-reliance

b. Incorrect acceptance

c. Under-reliance

d. Incorrect rejection

35. 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

36. Which of the following is true about sampling and non-

sampling risks?

a. Sampling risk can be reduced by increasing the sample

size

b. Sampling risk cannot be eliminated

c. Non-sampling risk can be eliminated by proper

engagement planning, supervision and review

d. Non-sampling risk arises from 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.

37. In testing A/R, an auditor sends out a positive

confirmation requests to 100 randomly selected

customers. A customer returns the confirmation

indicating that the balance is correct when, in fact, the

balance is overstated. This is an example of

a. Projected misstatement

b. Sampling error

c. Standard error

d. Non-sampling error

38. Which of the following statements about the process of

defining the population is not correct?

a. The auditor can define the population to include the

desired data.

b. The auditor may generalize only about that population

that has been sampled.

c. The population represents the body of data about which

the auditor wishes to generalize.

d. The auditor can randomly sample from any part of the

population that she chooses.

39. What is the primary objective of using stratified

sampling in auditing?

a. To increase the confidence level at which a decision will

be reached from the results of the sample selected.

b. To determine the occurrence rate for a given

characteristic in the population being studied.

c. To decrease the effect of variance in the total population.

d. To determine the precision range of the sample selected.

40. When selecting a stratified sample, the sample size is:

a. Determined for the unstratified population and the

apportioned to each stratum.

b. Determined for each stratum and selected from that

stratum.

c. Determined for each stratum and selected randomly

from the entire unstratified population.

d. Always larger than if unstratified sampling had been

used.

41. Of the following statements, which one best

differentiates statistical sampling from non-statistical

sampling?

a. Statistical sampling is a mathematical approach to inference,

whereas non-statistical sampling is a more subjective approach.

b. Non-statistical sampling has greater applicability to large

populations than does statistical sampling.

c. Non-statistical sampling is more subjective, but produces

greater consistency in the application of audit judgment.

d. Non-statistical sampling has greater applicability to populations

that lend themselves to random selection.

42. Statistical sampling is best known for combining

a. Binomial and confidence intervals

b. Probability and statistical inference with audit

judgment

c. Random and haphazard selection

d. Hypergeometric distribution with audit risk

43. A non-statistical 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

44. Which of the following statistical sampling plans

does not use a fixed sample size for tests of

controls?

a. Sequential sampling

b. Ratio estimation sampling

c. MUS sampling

d. Variables sampling

45. Discovery sampling should be used to estimate

whether a population contains

a. Errors of any kind

b. Critical deviations

c. Noncritical errors

d. No errors

46. When confirming receivables in testing for

overstatements, there are few or no

misstatements expected, and the selection is

based on monetary amounts, the auditor is likely

to use

a. Attribute sampling

b. Ratio estimation sampling

c. MUS sampling

d. Stratified mean-per-unit sampling

47. Statistical sampling techniques may be used to sample

‘attributes’ as well as ‘variables’. An example of a ‘variable’

that can be tested using statistical sampling technique

would be:

a. The number of errors in the client prepared aging schedule

of accounts receivable

b. Compliance with the requirement that each voucher be

initiated by the treasurer before a check is prepared for

payment of the voucher.

c. The number of entries improperly posted to a job order

cost card.

d. The balance in the A/R account

48. An auditor is applying probability-proportional-to-

size (PPS) sampling. If the population consists of

200 items and is represented by P1,000,000 what

is the probability the auditor will select for testing

an account recorded at P100,000?

a. 0.005

b. 0.100

c. 0.025

d. Not determinable from the facts given

49. In MUS sampling, the expected amount of

misstatement must be

a. Less than tolerable misstatement

b. Greater than tolerable misstatement

c. Equal to tolerable misstatement

d. Either A or C

50. If all other factors specified in a variables sampling

plan remain constant, increasing the acceptable

risk of incorrect acceptance would cause the

required sample size to

a. Become indeterminate

b. Increase

c. Decrease

d. Remain the same

51. In substantive testing which of the following would increase

sample size?

a b c d

Assessment of control risk Inc Inc Inc Dec

Reliance on other substantive procedures Inc Dec Dec Inc

Tolerable misstatement Dec Inc Dec Inc

Expected amount of misstatement Inc Dec Inc Dec

Risk of incorrect acceptance Dec Inc Dec Inc

52. When sampling for attributes, which of the following would

decrease sample size?

a b c d

Operating effectiveness of controls Inc Dec Inc Dec

Tolerable rate of deviation Dec Inc Inc Inc

Expected control deviation Inc Dec Dec Dec

Risk of over reliance Dec Inc Inc Dec

53. Which of the following is the exception rate that

the auditor expects to find before testing?

a. Sample exception rate

b. Computed exception rate

c. Tolerable exception rate

d. Estimated population exception rate

54. A major disadvantage of MUS sampling is which of

the following?

a. Sample selection is relatively easy

b. Sample sizes are relatively small

c. It is difficult to test for understatement

d. It directly controls for the risk of incorrect

acceptance

55. In analyzing misstatements using sampling

techniques, the auditor should analyze the

misstatements

a. Qualitatively and quantitatively

b. Absolutely and proportionately

c. Haphazardly and randomly

d. Methodically and systematically

56. 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 sample selection

b. Haphazard selection

c. Systematic sample selection

d. Statistical selection

57. A sample in which every possible combination of

items in the population has an equal chance of

constituting the sample is a:

a. Judgment sample

b. Random sample

c. Statistical sample

d. Representative sample

58. In sample selection, block sampling deals with

a. Each item in the population having an equal

chance of selection

b. Selecting all items on a day or week

c. An arbitrary selection with no conscious bias

d. Every nth item being selected after a random start

59. 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 sample selection

b. Systematic sample selection

c. Haphazard selection

d. Statistical selection

60. 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 a voided voucher, that voucher

ordinarily should be replaced by another voucher in the

random sample if the voucher

a. Constitutes a deviation

b. Cannot be located

c. Represents an immaterial peso amount

d. Has been properly voided.

## Molto più che documenti.

Scopri tutto ciò che Scribd ha da offrire, inclusi libri e audiolibri dei maggiori editori.

Annulla in qualsiasi momento.