Multiple Choice Questions
1. Which of the following represents sampling risk?
a. Improperly assessing the risk of material misstatement
b. Testing the wrong population to achieve the audit objective
c. Selecting a sample that is not representative of the population
d. Inaccurately identifying misstatements in a sample
2. An advantage of using statistical sampling techniques is that such techniques:
a. Mathematically measure risk
b. Eliminate the need for judgmental decisions
c. Define the values of precision and reliability required to provide audit satisfaction
d. Have been established in the courts to be superior to judgmental sampling
3. Which of the following combinations results in a decrease in an attribute estimation sample size?

4. An internal auditor selects a statistical sample from a large inventory of replacement parts. Which of the following audit objectives would be most appropriate if the sampling method used is PPS?
a. The auditor plans to estimate the age of individual inventory items.
b. The auditor plans to make a statement concerning the total dollar amount of misstatement in the population from the recorded book value.
c. The auditor wishes to accept or reject the hypothesis that the proportion of defective parts in the population is less than 5%.
d. The auditor wishes to estimate the proportion of defective parts in the population.
5. Which of the following best describes an inherent limitation of the PPS sampling method?
a. It can be used only for substantive testing of asset accounts.
b. It is complicated and always requires the use of a computer system to perform the calculations.
c. Error rates must be large and the misstatements must be overstatements.
d. Error rates must be small and the misstatements must beoverstatements.

Transcribed Image Text:

Risk of Assessing Control Risk Too Low a. Increase b. Decrease c. Increase d. Increase Tolerable Rate Decrease Increase Increase Increase Expected Population Failure Rate Increase Decrease Decrease Increase