cpa audit review ch 15 review 6

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cpa audit review ch 15 review 6
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2014-10-15 23:52:42
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cpa audit review ch 15 review 6
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  1. Attribute sampling is typically used to --------------------------.
    test controls.
  2. The factors necessary to determine sample size include (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, and (3) ---------------------------------------------------. The population is usually assumed to be infinite, and tables are used to identify the appropriate sample size.
    the expected population deviation rate.
  3. The factors necessary to determine sample size include (1) the desired assurance (complement of the risk of overreliance) that the tolerable population deviation rate is not exceeded by the actual rate, (2) -----------------------------------------------------------, and (3) the expected population deviation rate. The population is usually assumed to be infinite, and tables are used to identify the appropriate sample size.
    the tolerable population deviation rate
  4. The factors necessary to determine sample size include (1) --------------------------------------------------------------------------------------------------------------------------------------------------------------, (2) the tolerable population deviation rate, and (3) the expected population deviation rate. The population is usually assumed to be infinite, and tables are used to identify the appropriate sample size.
    the desired assurance (complement of the risk of overreliance) that the tolerable population deviation rate is not exceeded by the actual rate,
  5. An auditor is testing a multinational corporation’s fixed asset purchases for overstatement and notices that, out of the hundreds of purchases, a significant number of large purchases were made during the year. The auditor decides to use monetary-unit (MUS) sampling to test fixed asset purchases. Which of the following would not be an advantage of using MUS in this situation?

    A.MUS sampling automatically stratifies the population.

    B.If no misstatements are expected, MUS sampling will usually result in a smaller sample size than classical variables sampling.

    C.MUS sampling eliminates the need for auditor’s judgment.

    D.MUS sampling is easier to use than classical variables sampling.
    C.MUS sampling eliminates the need for auditor’s judgment.

    Statistical sampling, such as MUS sampling, allows the auditor to obtain an objective sample from an existing population. However, this method of sampling does not eliminate the need for the auditor’s judgment in evaluating the sample.
  6. When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible misstatement in either direction. This statistical concept is known as

    A.Standard deviation.

    B.Reliability.

    C.Projected misstatement.

    D.Precision.
    D.Precision.

    The precision or confidence interval (allowance for sampling risk) is an interval around the sample statistic that is expected to include the true value of the population at the specified confidence level. When using classical variables sampling, the allowance for sampling risk is calculated based on the normal distribution.
  7. An auditor initially planned to use unrestricted random sampling with replacement in the audit of accounts receivable. Later, the auditor decided to use unrestricted random sampling without replacement. As a result of this decision, the sample size should

    A.Decrease.

    B.Remain the same.

    C.Either increase or decrease, but the direction cannot be determined.

    D.Increase.
    A.Decrease.

    Unrestricted random sampling means that each item in the population has an equal and nonzero chance of being selected. Sampling with replacement means that an item may be included more than once in the sample. Sampling without replacement removes an item from the population after selection. Thus, sampling without replacement uses information about the population more efficiently. It results in a smaller sample, if other things are held constant, because the sample size formula for sampling with replacement is multiplied by the finite population correction factor (always less than 1.0).
  8. An auditor is performing tests of details of pricing and extensions of perpetual inventory balances consisting of a large number of items. Past experience indicates numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?

    A.Monetary-unit.

    B.Unstratified mean-per-unit.

    C.Stop or go.

    D.Ratio or difference estimation.
    D.Ratio or difference estimation.

    Difference estimation of population misstatement involves (1) determining the differences between the audit and carrying amounts for items in the sample, (2) adding the differences, (3) calculating the mean difference, and (4) multiplying the mean by the number of items in the population. An allowance for sampling risk also is calculated. Ratio estimation is similar except that it estimates the population misstatement by multiplying the carrying amount of the population by the ratio of the total audit value of the sample items to their total carrying amount. It has been demonstrated that ratio or difference estimation is both reliable and efficient when small misstatements predominate and they are not skewed.

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