Module EOverview of Sampling Multiple Choice Questions 1. The set of items about which a statement is made in a sampling application is referred to as a (n): A. Sampling unitB. SampleC. Population unitD. Population 2. Which of the following is not an advantage of statistical sampling? A. It requires a precise and definite approach to the audit problemB. It incorporates evaluation that calculates a direct relation between the sample results and the entire population under auditC. It requires auditors to specify particular judgments on risk and materialityD. It permits the auditor to reapply evaluation judgments based on factors in addition to the sample evidence3. Nonsampling risk can occur in which of the following types of sampling plans: A. Statistical sampling: Yes; Nonstatistical sampling: YesB. Statistical sampling: Yes; Nonstatistical sampling: NoC. Statistical sampling: No; Nonstatistical sampling: YesD. Statistical sampling: No; Nonstatistical sampling: No 4. The probability that an auditor’s conclusion based on a sample might be different from the conclusion based on the entire population identifies the concept of: A. Confidence levelsB. Nonsampling riskC. Nonstatistical samplingD. Sampling risk5. Select the description that best illustrates sampling risk. A. Applying audit procedures, which are inappropriate for the audit objectivesB. Failing to recognize misstatements or deviations in the documents examinedC. Arriving at incorrect statistical conclusions due to computational errorsD. Choosing a sample which has proportionately more errors than the population6. An auditor is most likely to use statistical sampling under which of the following situations? A. Random numbers can be associated with population itemsB. Strictly defensible results based on mathematics are not necessaryC. The auditor has a very good knowledge of the populationD. The population is very diverse with some segments especially prone to misstatement 7. In which of the following situations would the use of sampling be most appropriate? A. The need for precise information is less importantB. The number of items comprising the population is smallerC. The likelihood of selecting a representative sample is relatively lowD. The use of sampling would be appropriate in all of the above situations 8. Which of the following measures would not be used to measure the auditor’s exposure to sampling risk? A. Determining an appropriate sample sizeB. Ensuring that all items have an equal likelihood of being selectedC. Applying the appropriate type of substantive procedureD. Evaluating sample results to consider the possibility that the sample does not appropriately represent the population 9. Which of the following types of sampling applications can appropriately be used under generally accepted auditing standards? A. Statistical sampling: Yes; Nonstatistical sampling: YesB. Statistical sampling: Yes; Nonstatistical sampling: NoC. Statistical sampling: No; Nonstatistical sampling: YesD. Statistical sampling: No; Nonstatistical sampling: No 10. Which of the following would typically result in nonsampling risk? A. Selecting a nonrepresentative sampleB. Making a mistake in recording sample resultsC. Intentionally omitting several items in the population from examinationD. None of the above result in nonsampling risk 11. If a golf professional is interested in determining whether a golf ball can be hit over 300 yards, which of the following relationships between the adjusted sample estimate of distance and the actual distance would represent sampling risk? A. Adjusted Estimate = 295 yards, Actual = 298 yardsB. Adjusted Estimate = 305 yards, Actual = 301 yardsC. Adjusted Estimate = 310 yards, Actual = 295 yardsD. All of the above are examples of sampling risk 12. In which of the following types of sampling applications is the auditor exposed to sampling risk? A. Statistical sampling: Yes; Nonstatistical sampling: YesB. Statistical sampling: Yes; Nonstatistical sampling: NoC. Statistical sampling: No; Nonstatistical sampling: YesD. Statistical sampling: No; Nonstatistical sampling: No13. Which of the following allow the auditor to limit the exposure to sampling risk? A. Determining an appropriate sample size: Yes; Performing an appropriate audit procedure: YesB. Determining an appropriate sample size: Yes; Performing an appropriate audit procedure: NoC. Determining an appropriate sample size: No; Performing an appropriate audit procedure: YesD. Determining an appropriate sample size: No; Performing an appropriate audit procedure: No14. What is the primary drawback with respect to the use of sampling? A. Individuals may fail to obtain a true understanding of the question they are examiningB. The time spent in planning and selecting the sample may exceed the time savings from examining only a subset of the itemsC. The conclusion reached by examining a sample of items may differ from the conclusion that would be reached if the entire population were examinedD. Sampling cannot be used to examine account balances that are material to the financial statements15. Which of the following statements best describes nonstatistical sampling? A. Nonstatistical sampling does not allow the auditor to measure the exposure to sampling riskB. Nonstatistical sampling only selects very large dollar items for examinationC. Nonstatistical sampling should be used only in situations in which the auditor anticipates issuing a qualified or adverse opinion on the client’s financial statementsD. Nonstatistical sampling should be used when the auditor selects a substantive audit approach16. In sampling, an individual makes a statement about a _____ of interest by examining a _____ (or subset) of items A. Sample; populationB. Sampling unit; populationC. Population; sampleD. Population; sampling unit 17. Which of the following statements is true with regard to sampling? A. Sampling can only be used in situations in which the population is relatively homogenous in natureB. Sampling is typically more efficient than examining the entire populationC. Sampling is typically more effective than examining the entire populationD. Sampling should be used when the need for more precise information is important 18. Which of the following is not a condition that must be met for an application to be classified as audit sampling? A. Less than 100 percent of the items comprising the population must be examinedB. The results of the sample must be projected to the population being examinedC. The population being examined must have a dollar balance greater than materialityD. All of the above are conditions that must be met for an application to be classified as audit sampling 19. The risk that the decision made by the auditor differs from the decision that would have been made if the entire population were examined is referred to as: A. Audit riskB. Risk of material misstatementC. Nonsampling riskD. Sampling risk 20. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to: A. Eliminate the risk of nonsampling errorB. Reduce the level of audit risk and materiality to a relatively low levelC. Measure the sufficiency of the evidence gatheredD. Minimize the failure to detect misstatements and irregularities 21. Place the following steps in the sampling process in the order in which they are performed. 1 = Measure sample items2 = Select sample items3 = Define the population A. 1, 2, 3B. 3, 1, 2C. 2, 1, 3D. 3, 2, 122. Why is defining the population so important in a sampling application? A. To permit the auditor to select the appropriate type of substantive procedureB. To ensure that the results appropriately represent the entire populationC. To reduce sampling risk to the appropriate levelD. To allow the auditor to appropriately measure sample items23. Which of the following steps in the sampling process is ordinarily performed last? A. Determine the objective of samplingB. Measure sample itemsC. Evaluate the sample resultsD. Define the characteristic of interest 24. After the auditor has defined the population to be examined, the next step would

be to: A. Define the characteristic of interestB. Select the sample itemsC. Determine the sample sizeD. Measure the sample items25. Which of the following most closely represents an unrestricted random selection procedure? A. Identifying a starting point within the population and bypassing a fixed number of itemsB. Matching items in the population to a series of randomly-selected numbersC. Randomly selecting invoices to customers whose last names start with “W”D. Randomly picking items from an accounts receivable file26. A disadvantage of using a systematic random selection procedure is that: A. This type of procedure does not permit the auditor to measure the exposure to sampling riskB. This type of procedure does not make all items available for selectionC. This type of procedure requires that the population be arranged in a random orderD. This type of procedure provides the auditor with a higher level of exposure to nonsampling risk compared to other selection procedures27. Which of the following is not a criterion for using a selection method with statistical sampling? A. The method provides a reasonable likelihood of selecting a representative sampleB. The method allows the probability of selecting sample items to be determinedC. The method specifically identifies each item in the population with a numberD. The method allows the selection process to be replicated28. The method of sample selection in which a random starting point is selected and a fixed number of items are bypassed prior to the next item being selected is referred to as: A. Block selectionB. Haphazard selectionC. Systematic random selectionD. Unrestricted random selection?29. A sample selection method in which items are selected in a nonsystematic manner is referred to as: A. Block selectionB. Haphazard selectionC. Systematic random selectionD. Unrestricted random selection 30. A sample selection method in which a series of contiguous items are selected from the population is referred to as: A. Block selectionB. Haphazard selectionC. Systematic random selectionD. Unrestricted random selection31. The precision interval has a ____ percent probability of including the ____. A. Sampling risk; adjusted sample estimateB. Sampling risk; true population valueC. 1 minus sampling risk; adjusted sample estimateD. 1 minus sampling risk; true population value 32. What is the appropriate precision interval? A. 47 to 51 yearsB. 47 to 53 yearsC. 47 to 57 yearsD. 51 to 57 years33. What is the likelihood that the precision interval includes the true population value? A. 2.5 percentB. 5 percentC. 95 percentD. 97.5 percent34. What would your conclusion be with respect to the sample results? A. The average age is greater than 50 yearsB. The average age is not greater than 50 yearsC. The average age is greater than 54 yearsD. The average age is not greater than 54 years35. Which of the following does not affect the sample size in an attribute sampling application? A. Expected deviation rateB. Upper limit deviation rateC. Sampling riskD. Tolerable deviation rate 36. If the upper limit deviation rate exceeds the tolerable deviation rate, the auditor would most likely: A. Accept the account balance as fairly statedB. Reject the account balance as fairly statedC. Increase the planned effectiveness of substantive proceduresD. Not increase the planned effectiveness of substantive procedures37. In the study of internal control, the auditor uses sampling to compare the ____ to the ____. A. Adjusted estimate of misstatement; materialityB. Sampling risk; precisionC. Adjusted estimate of the deviation rate; tolerable deviation rateD. Precision interval; upper error limit38. Why is the auditor most concerned with the risk of assessing control risk too low rather than the risk of assessing control risk too high? A. The risk of assessing control risk too high is not a type of sampling riskB. The risk of assessing control risk too low exposes the auditor to an efficiency lossC. The risk of assessing control risk too low may result in the auditor failing to perform sufficient substantive proceduresD. The risk of assessing control risk too low cannot be measured by the auditor during the sampling process 39. While performing an audit of accounts receivable, Allen, CPA, found that the sample results supported the conclusion that the accounts receivable balance was materially misstated. However, the balance was, in fact, not materially misstated. This situation illustrates the risk of: A. Incorrect rejectionB. Incorrect acceptanceC. Assessing control risk too lowD. Assessing control risk too high40. Which of the following risks expose the auditor to effectiveness losses? A. Risk of assessing control risk too high, risk of incorrect acceptanceB. Risk of assessing control risk too low, risk of incorrect rejectionC. Risk of assessing control risk too high, risk of incorrect rejectionD. Risk of assessing control risk too low, risk of incorrect acceptance41. The type of sampling most frequently used by the auditors during their substantive procedures is referred to as: A. Account balance samplingB. Attribute samplingC. Item samplingD. Variables sampling 42. Which of the following characteristics of substantive procedures is most closely associated with the use of sampling? A. Extent of substantive proceduresB. Nature of substantive proceduresC. Timing of substantive proceduresD. All of the above are closely associated with the use of sampling.43. Which of the following sampling risks is associated with the use of variables sampling? A. Risk of assessing control risk too high: Yes; Risk of incorrect rejection: YesB. Risk of assessing control risk too high: Yes; Risk of incorrect rejection: NoC. Risk of assessing control risk too high: No; Risk of incorrect rejection: YesD. Risk of assessing control risk too high: No; Risk of incorrect rejection: No44. Which of the following does not have a direct relationship with sample size? A. Expected deviation rateB. Population sizeC. Risk of assessing control risk too lowD. All of the above have a direct relationship with sample size. 45. Which of the following components of the audit risk model is most closely associated with variables sampling? A. Audit riskB. Risk of material misstatementC. Detection riskD. Analytical procedures risk46. In performing variables sampling, the auditor will conclude that the account balance is not materially misstated if the ____ is less than or equal to ____. A. Upper error limit; tolerable errorB. Expected error; tolerable errorC. Tolerable error; upper error limitD. Tolerable error; expected error47. When the auditor concludes that the account balance is not materially misstated when, in fact, it is materially misstated, the auditor has committed the: A. Risk of assessing control risk too highB. Risk of assessing control risk too lowC. Risk of incorrect acceptanceD. Risk of incorrect rejection48. Why does the risk of incorrect rejection result in an efficiency loss to the auditor? A. Additional time is necessary to propose adjustments to the client’s account balancesB. The auditor typically expands the sample to examine additional components or transactions of the account balanceC. More detailed audit procedures are performed on sample items already examined by the auditorD. The auditor typically extends the study of internal control to attempt to obtain a reduction in the level of risk of material misstatement 49. Which of the following is not true with respect to the risk of incorrect acceptance? A. It results in an efficiency loss to the auditorB. It occurs when the auditor’s sample indicates that the account balance is fairly statedC. It occurs when the true misstatement in the account balance exceeds tolerable error (materiality)D. The auditor can measure the exposure to this risk when using statistical sampling applications50. Which of the following has a direct relationship with sample size in a variables sampling application? A. Tolerable error: Yes; Expected error: YesB. Tolerable error: Yes; Expected error: NoC. Tolerable error: No; Expected error: YesD. Tolerable error: No; Expected error: No