Chapter 11

The primary reason for an internal auditor to use statistical sampling rather than nonstatistical sampling is to:

A. Allow the auditor to quantitfy, and therefore control, the risk of making an incorrect decision based on sample evidence

B. Obtain a smaller sample than would be required if nonstatistical sampling were used

C. reduce the problems associated with the auditor's judgement concerning the competency of the vidence gathered when nonstatistial is used

D. Obtain a sample more representative of the population than would be obtained if nonstatistical sampling techniques were used

Which of the follwing is an element of sampling risk as opposed to an element of nonsampling risk?

A. Determining a sample size that is too small.

B. Performing an inappropriate audit procedure.

C. Failing to detect a control deviation.

D. Forgetting to perfomr a specified audit procedure.

For wchich of the following would an internal auditor most likely use attribute sampling?

A. Determining whether the yer-end inventory balance was overstated.

B. Selecting fixed asset additions to inspect.

C. Choosing inventory items to test count

D. Inspecting employee timecards for proper approval

If all other factors specified in an attribute sampling plan remain contstant, chanign the expected population deviation rate from 1% to 2% and changing the tolerable deviation rate from 7% to 6% would cause the required sample size to:

A. Increase

B. Decrease

C. Remain the same

D. Change by 2%

An internal auditor selects a sample of sales invoices and matches them with shipping documents. This procedure most directly addresses which of the following assertions?

A. All shipments to customers are recorded as receivables.

B. All billed sales are for goods shipped to customers.

C. All recorded receivables represent goods shipped to customers.

D. All shipments to customers are billed.

An internal auditor is testing cash disbursement transactions. Internal control policies require every check request to be accompanied by an approed voucher (that is, a package of documents evidencing that a good or service has been received and invoiced by the vendor). The voucher approval is based on a three-way matching of a purcase order, receiving report, and verndor's nvoice. To determine whether checks have proper support, the IA should begin her testing procedures by selecting items from the population of:

A. Check copies
B. Purchse orders
C Receiving Reports
D. Approved couchers.

The achieved upper deviation limit is 7% and the risk of assessing control risk too low is 5%. How should the internal auditor interpret this attribute sampling outcome?

A. There is a 7% chance that the deviation rate in the population is less than or equal to 5%

B. There is a 5% chance that the deviation rate in the population is less than 7%

C. There is a 5% chance that the deviation rate in the population exceeds 7%

D. There is a 95% chance that the deviation rate in the population equals 7%

An internal auditor should consider the qualitative aspects of dviations found in asample in addition to evaluating the number of deviations. For which of the following situations should the internal auditor be most concerned?

A. There wre fewer deviations in the sample than expected.

B. The deviations found are similar in nature to those found during the last audit of the area.

C. The deviation found appear to have been caused by an employee's misunderstanidng of instructions

D. The deviations found may have been caused intentionally.

An internal auditor wants to test customers' A/R balances for overstatement on a sample basis. Which of the following would be the least valid reason for deciding to use PPS sampling rather than classical variables sampling?

A. PPS sampling is generally thought to be earier to use than classical variables sampling

B. The internal auditor expects to find no misstatements and PPS sampling typically requires a smaller sample size than classical variables sampling in this situation

C. PPS sampling automatically stratifies the population

D. Using PPS sampling eliminates the need for professional judgement in determining the appropriate sample size and evaluating the sample results