cpa audit review ch 15 review 2

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  1. Which of the following would be a consideration in planning an auditor’s sample for a test of controls?  

    The auditor’s allowable risk of underreliance.

    Preliminary judgments about materiality levels.  

    The level of detection for the account.

    The auditor’s allowable risk of overreliance.
    The auditor’s allowable risk of overreliance.  

    .A test of controls is an application of attribute sampling. The initial size for an attribute sample is based on (1) the desired assurance (complement of the risk of overreliance) that the tolerable population deviation rate is not exceeded by the actual rate, (2) the tolerable population deviation rate, (3) the expected population deviation rate, and (4) the population size. However, a change in the size of the population has a very small effect on the required sample size when the population is large. Consequently, population size is often not considered unless it is small.
  2. Many statistical estimates may be useful to an auditor. But most are either of a quantity or a deviation rate. The statistical terms that correspond to quantities and deviation rates, respectively, are  

    Constants and attributes.  

    Variables and attributes.

    Constants and variables.

    Attributes and variables.
    Variables and attributes.  

    Variables sampling is used by auditors to estimate quantities or dollar amounts in substantive testing. Attribute sampling applies to testing of internal controls and is used to estimate a deviation rate (occurrence rate) within a population.
  3. Which of the following best describes what the auditor means by the rate of occurrence in an attribute sampling plan?  

    The degree of confidence that the sample is representative of the population.

    The number of deviations that can be estimated to be contained in the sample.  

    The dollar range within which the true population total can be expected to fall.

    The estimated frequency with which a certain characteristic occurs within a population.
    The estimated frequency with which a certain characteristic occurs within a population.  

    Attribute sampling is used to estimate the rate of occurrence of a specific attribute in a population, e.g., the number of invoices paid twice by a client. In effect, the auditor attempts to estimate the number (or percentage) of times this specified deviation occurred in the population based upon results from the sample.
  4. Stratified mean-per-unit (MPU) sampling is a statistical technique that may be more efficient than unstratified MPU because it usually  

    Produces an estimate having a desired level of precision with a smaller sample size.  

    May be applied to populations in which many monetary misstatements are expected to occur.

    Increases the variability among items in a stratum by grouping sampling units with similar characteristics.

    Yields a weighted sum of the strata standard deviations that is greater than the standard deviation of the population.
    Produces an estimate having a desired level of precision with a smaller sample size. 

    The primary objective of stratification is to reduce the effect of high variability by dividing the population into subpopulations. Reducing the variance within each subpopulation allows the auditor to sample a smaller number of items while holding precision and confidence level constant.
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cpa audit review ch 15 review 2
cpa audit review ch 15 review 2
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