Multiple Choice Questions
1. While performing a test of details during an audit, the auditors determined that the sample results supported the conclusion that the recorded account balance was materially misstated. This situation indicates the risk of
a. Incorrect rejection.
b. Incorrect acceptance.
c. Assessing control risk too low.
d. Assessing control risk too high.

2. When planning a sample for a substantive test of details, auditors should consider tolerable misstatement for the sample that should
a. Be related to the auditors' business risk.
b. Not be adjusted for qualitative factors.
c. Be related to preliminary judgments about materiality levels.
d. Not be changed during the audit process.

3. How would an increase in tolerable misstatement and an increase in assessed level of control risk affect the sample size in a substantive test of details? Increase in tolerable misstatement Increase in assessed level of control risk
a. Increase sample size Increase sample size
b. Increase sample size Decrease sample size
c. Decrease sample size Increase sample size
d. Decrease sample size Decrease sample size

4. As lower acceptable levels of both audit risk and materiality are established, audi tors should plan more work on individual accounts to
a. Find smaller misstatements.
b. Find larger misstatements.
c. Increase the tolerable misstatement in the accounts.
d. Decrease the risk of assessing control as being too low.

5. In conducting a substantive test of an account balance, auditors hypothesize that no material misstatement exists. The risk that sample results will support the hypothesis when a material misstatement actually does exist is the risk of
a. Incorrect rejection.
b. Alpha error.
c. Incorrect acceptance.
d. Type 1 error.

6. Using statistical sampling to assist in verifying the year -end accounts payable balance, and auditors has accumulated the following data:

Using the ratio estimation technique, the auditors' estimate of year -end accounts payable balance is
a. $6,150,000.
b. $6,000,000.
c. $5,125,000.
d. $5,050,000.

7. Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?

8. Which of the following best illustrates the concept of sampling risk?
a. A randomly chosen sample may not be representative of the population as a whole on the characteristics of interest.
b. Auditors can select audit procedures that are not appropriate to achieve the specific objectives.
c. Auditors could fail to recognize errors in the documents examined for the cho sen sample.
d. The documents related to the chosen sample could not be available for inspection.

9. An underlying feature of random -based selection of items is that each
a. Stratum of the accounting population be given equal representation in the sample.
b. Item in the accounting population be randomly ordered.
c. Item in the accounting population should have an opportunity to be selected.
d. Item must be systematically selected using replacement.

10. If certain forms are not consecutively numbered
a. Selection of a random sample probably is not possible.
b. Systematic sampling can be appropriate.
c. Stratified sampling should be used.
d. Random number tables cannot be used.

Transcribed Image Text:

Number of accounts 4,100 200 Balance determined Book balance $5,000,000 by the auditors Population Sample $250,000 $300,000 Expected amount of misstatements No Yes No Yes Measure of tolerable misstatement No Yes Yes No a. C. d. 0