The sample size for a substantive test of details of an account balance is affected by a number of factors. Assuming all other information remains constant, which of the following would lead to a smaller sample size? Show
A) Less reliance on internal controls. B) An increase in the amount of tolerable misstatement. C) Less reliance on substantive analytical procedures. D) Larger expected frequency of misstatements. B) An increase in the amount of tolerable misstatement. An auditor may decide to decrease the desired level of confidence when A) Increased reliability based on the sample is desired. B) The cost and effort of selecting additional sample items are low. C) Many differences (audit value minus recorded value) are expected. D) The planned evidence required from a particular test of detail is reduced because of the strength of evidence provided by an improved substantive analytical procedure. D) The planned evidence required from a particular test of detail is reduced because of the strength of evidence provided by an improved substantive analytical procedure. Monetary-unit-sampling [MUS] is less efficient and generally not used if A) The auditor's objective is oriented towards understatements. B) Computerized system account balances are being audited. C) The account contains a large book value and a large number of transactions. D) Statistical conclusions are to be made relating to the sample. A) The auditor's objective is oriented towards understatements. An auditor would conclude that an account balance is not fairly stated if the __________________ is less than the __________________. A) Projected misstatement; Expected misstatement. B) Tolerable misstatement; Upper misstatement limit. C) Projected misstatement; Upper misstatement limit. D) Upper misstatement limit; Tolerable misstatement. B) Tolerable misstatement; Upper misstatement limit. An auditor plans to use a monetary-unit sampling plan with a systematic sample selection on an account balance of $1,000,000. There are over 50 items that make up the account balance, ten of which are individually over $50,000. To ensure that all accounts with balances of at least $50,000 are selected, the minimum sample size should be A) 10. B) 20. C) 30. D) 50. B) 20. In a probability-proportional-to-size sample with a sampling interval of $15,000, an auditor discovered that a selected inventory item with a recorded amount of $5,000 had an audited amount of $3,500. If this were the only misstatement discovered by the auditor, the projected misstatement of this sample would be A) $1,500. B) $4,500. C) $5,000. D) $6,428. B) $4,500. Which of the following statements is true regarding audit sampling? A) Audit firms are increasingly utilizing nonstatistical sampling plans using their own proprietary software. B) Audit firms have reduced their reliance on nonstatistical sampling plans using EXCEL and other commercially developed software. C) Audit firms are increasingly utilizing statistical sampling plans using their own proprietary software. D) Audit firms are increasingly utilizing statistical sampling plans using EXCEL and other commercially developed software. A) Audit firms are increasingly utilizing nonstatistical sampling plans using their own proprietary software. In applying classical variables sampling, an auditor will generally evaluate sample results by calculating the possible error in either direction of a projected misstatement (or point estimate). This statistical concept is known as A) Reliability. B) Projected misstatement. C) Standard deviation. D) Precision [or confidence interval]. D) Precision [or confidence interval]. Which of the following is considered one of the main advantages of classical variables sampling over monetary-unit sampling? A) Any amount that is individually significant is automatically identified and selected. B) Auditors rarely need the assistance of computer software to design and carry out an effective sampling plan. C) Inclusion of zero and negative balances generally do not require special sampling considerations. D) An understanding of standard deviation and normal distribution theory is not necessary. C) Inclusion of zero and negative balances generally do not require special sampling considerations. Using classical variables sampling, the projected population misstatement is $40,000 and the confidence bound is $2,400. What amount will be compared to tolerable misstatement to determine whether the account is fairly stated? A) $40,000. B) $41,200. C) $42,400. D) There is not enough information given to determine. C) $42,400. Which of the following represents the reason(s) that statistical sampling has fallen out of favor? A) Auditors were over-relying on statistical sampling techniques. B) There is poor linkage between the applied audit setting and traditional statistical sampling applications. C) Both (1) the Auditors were over-relying on statistical sampling techniques and (2) there is poor linkage between the applied audit setting and traditional statistical sampling applications. D) Statistical sampling is no longer required because information technology allows the auditor to test 100% of necessary data. C) Both (1) the Auditors were over-relying on statistical sampling techniques and (2) there is poor linkage between the applied audit setting and traditional statistical sampling applications. Which of the following relationships is correct? A) Desired confidence level and sample size are inversely related. B) Tolerable misstatement and sample size are inversely related. C) Expected misstatement and sample size are inversely related. D) Tolerable misstatement and desired confidence level are directly related. B) Tolerable misstatement and sample size are inversely related. When determining the sample size for MUS application, the auditor must determine all of the following except: A) The desired confidence level. B) The tolerable misstatement. C) The expected population misstatement. D) The estimated standard deviation. D) The estimated standard deviation. Which of the following sampling methods would be used to estimate a numeric measurement of a population, such as a dollar value? A. Random sampling B. Numeric sampling C. Attribute sampling D. Variable sampling D. Variable sampling A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size? A. Greater reliance on internal controls B. Greater reliance on analytical procedures C. Smaller expected frequency of misstatements D. Smaller amount of tolerable misstatement D. Smaller amount of tolerable misstatement Which of the following sampling planning factors would influence the sample size for a substantive test of details for specific account? A. Expected Misstatement - No, Tolerable Misstatement - No B. Expected Misstatement - Yes, Tolerable Misstatement - Yes C. Expected Misstatement - No, Tolerable Misstatement - Yes D. Expected Misstatement - Yes, Tolerable Misstatement - No B. Expected Misstatement - Yes, The risk of incorrect acceptance relates to the A. Effectiveness of the audit B. Efficiency of the audit C. Planning materiality D. Allowable risk of tolerable misstatement A. Effectiveness of the audit Which of the following statements concerning monetary-unit sampling is correct? A. The sampling distribution should approximate the normal distribution B. Overstated units have a lower probability of sample selection than units are understated C. The auditor controls the risk of incorrect acceptance by specifying the desired confidence level for the sampling plan D. The sampling interval is calculated by dividing the number of physical units in the population by the sample size C. The auditor controls the risk of incorrect acceptance by specifying the desired confidence level for the sampling plan How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details? A. Increase in Tolerable Misstatement - Decrease sample size, Increase in Assessed Level of Control Risk - Decrease sample size B. Increase in Tolerable Misstatement - Decrease sample size, Increase in Assessed Level of Control Risk - Increase sample size C. Increase in Tolerable Misstatement - Increase sample size, Increase in Assessed Level of Control Risk - Decrease sample size D. Increase in Tolerable Misstatement - Increase sample size, Increase in Assessed Level of Control Risk - Increase sample size B. Increase in Tolerable Misstatement - Decrease sample size, Increase in Assessed Level of Control Risk - Increase sample size An auditor is performing substantive procedures of pricing and extensions of perpetual inventory balances consisting of a large number of items. Past experience indicates that there may be numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate? A. Classical variables sampling B. Monetary-unit sampling C. Stop-n-go sampling D. Attribute sampling A. Classical variables sampling Which of the following statements concerning the auditor's use of statistical sampling is correct/ A. An Auditor needs to estimate the dollar amount of the standard deviation of the population in order to use classical variables sampling B. An assumption of monetary-unit sampling is that the underlying accounting population is normally distributed C. a classical variables sample needs to be designed with special considerations to include negative balances in the sample D. The selection of zero balances usually does not require special sample design considerations when using monetary-unit sampling A. An Auditor needs to estimate the dollar amount of the standard deviation of the population in order to use classical variables sampling In classical variables sampling, which of the following must be known in order to estimate the appropriate sample size required to meet the auditor's needs in a given situation? A. The qualitative aspects of misstatements B. The total dollar amount in the population C. The acceptable level of risk D. The estimated percentage of deviations in the population C. The acceptable level of risk Which of the following would most likely be an advantage in using classical variable sampling rather than monetary-unit sampling? A. An estimate of the standard deviation of the population's recorded amounts is not required B. The auditor rarely needs the assistance of a computer program to design an efficient sample C. Inclusion of zero and negative balances generally does not require special design considerations D. Any amount that is individually significant is automatically identified and selected C. Inclusion of zero and negative balances generally does not require special design considerations How would increases in tolerable misstatements and assessed level of control risk affect the sample size in substantive test of details?The sampling interval is calculated by dividing the number of physical units in the population by the sample size. How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details? b. Increase in Tolerable Misstatement = Decrease sample size.
How does tolerable misstatement affect sample size?An increase in tolerable misstatement Decrease The lower the tolerable misstatement, the larger the sample size needs to be.
How would your sample size change if you increased your tolerable misstatement?Will sample size increase or decrease if there is an increase in the tolerable misstatement? There is an inverse relationship between sample size and tolerable misstatement, so the sample size would decrease if the tolerable misstatement increases.
How does detection risk affect sample size in substantive testing?As the assessed levels of inherent risk, control risk, and detection risk for other substantive procedures directed toward the same specific audit objective decreases, the auditor's allowable risk of incorrect acceptance for the substantive tests of details increases and, thus, the smaller the required sample size for ...
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How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details?
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