Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 15, Problem 23.3MCQ
To determine
Identify the correct option for the given situation.
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An auditor who uses statistical sampling for attributes in testing internal controlsshould reduce the planned reliance on a prescribed control when the(1) sample exception rate plus the allowance for sampling risk equals the tolerable rate.(2) sample exception rate is less than the expected rate of exception used inplanning the sample.(3) tolerable rate less the allowance for sampling risk exceeds the sample exceptionrate.(4) sample exception rate plus the allowance for sampling risk exceeds the tolerablerate.
In which of the following situations would an auditor most likely choose a substantive strategy and avoid
sampling transactions to test controls?
O The population size is large.
O The expected deviation rate is less than the tolerable deviation rate.
O The tolerable deviation rate is less than the expected deviation rate.
O The revised materiality level is lower than the planned level.
Which of the following is an advantage of nonstatistical sampling?a. It measures the audit team’s exposure to sampling risk.b. It is required by generally accepted auditing standards.c. It ensures that samples are randomly selected.d. It is typically less complex than statistical sampling
Chapter 15 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Prob. 11RQCh. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - Distinguish between the TER and the CUER. How is...Ch. 15 - Prob. 15RQCh. 15 - Prob. 16RQCh. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Prob. 20RQCh. 15 - Prob. 21RQCh. 15 - Prob. 22.1MCQCh. 15 - Prob. 22.2MCQCh. 15 - Prob. 22.3MCQCh. 15 - Prob. 23.1MCQCh. 15 - Prob. 23.2MCQCh. 15 - Prob. 23.3MCQCh. 15 - Prob. 24.1MCQCh. 15 - Prob. 24.2MCQCh. 15 - Prob. 24.3MCQCh. 15 - Prob. 25.1MCQCh. 15 - Prob. 25.2MCQCh. 15 - Prob. 25.3MCQCh. 15 - Prob. 27DQPCh. 15 - Lenter Supply Company is a medium-sized...Ch. 15 - Prob. 29DQPCh. 15 - Prob. 30DQPCh. 15 - Prob. 31DQPCh. 15 - Prob. 32DQPCh. 15 - Prob. 33DQPCh. 15 - Prob. 34DQPCh. 15 - Prob. 35DQPCh. 15 - Prob. 36CCh. 15 - Prob. 37ICA
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- In using audit sampling for exception rates: the auditor wants to know the most the exception rate is likely to be. sampling error is the likelihood that the auditor will miss a monetary misstatement. the upper limit of the interval estimate is known as the sampling risk. CUER cannot be considered in the context of specific audit objectives.arrow_forwardFor both tests of controls and substantive tests of details, non-sampling risk can be reduced by increasing sample size, while sampling risk can be reduced by proper engagement planning supervision and review. TRUE OR FALSE? WHY?arrow_forwardAn advantage of statistical sampling over nonstatistical sampling methods is that statistical methodsa. Afford more assurance than a nonstatistical sample of equal size.b. Provide an objective basis for quantitatively evaluating sampling risk.c. Can more easily convert the sample into a dual-purpose test useful for substantive procedures.d. Eliminate the need to use judgment in determining appropriate sample sizesarrow_forward
- s1: A stratified sample consist of sampling units selected without conscious bias. s2: All auditing procedures involve audit sampling. s3: A deviation from prescribed control procedures does not necessarily indicate the presence of monetary error A. all statements are true b. all statements are false c. s1 and s2 are true d. s1 and s3 are truearrow_forwardIf there is a detection of one control deviation, the auditor can do which of the following? a. Increase the sample size O b. Test a compensation control Oc. Amend the auditor's decision to rely on the control O d. All of the above are options for an auditor responding to detection of a control deviaticarrow_forwardWhich of the following statements about attribute sampling is correct? A. Larger transactions have a higher chance of being selected into the sample than smaller transactions. B. The risk of over-reliance does not affect the sample size. C. Attribute sampling is often used in the test of controls. D. The haphazard selection method is often used for attribute sampling. E. If the estimated population deviation rate is higher than the tolerable deviation rate, auditors conclude the internal control is effective.arrow_forward
- Auditors must be aware of sampling risks because: A The risk of type 2 error due to increased sampling might be avoided by increasing tests of controlsB The risk of a type 2 error is that decreased sampling might be avoided by increasing the materiality thresholdC The risk of a type 1 error due to decreased sampling might be avoided by reducing the substantive testsD The risk of a type 2 error is that a decreased sample might have a greater impact on audit costsE The risk with a type 1 error is that increased sampling will not have a greater impact on the auditor's opinionarrow_forwardWhat are the risks if the auditor concludes controls are operating effectively based on the sample and Control Risk is set too low?arrow_forwardRisk of incorrect rejection is defined as _______. the risk that the auditor concludes that a material misstatement does not exist when it does exist the risk that the auditor concludes that a material misstatement exists when it does not exist the risk that an auditor incorrectly rejects a client the risk that management may reject the audit opinion issued by the auditor An advantage of statistical sampling _______. is that it allows an auditor to measure control risk is that it allows an auditor to measure sampling risk is that it allows an auditor to measure inherent risk is that it is cheaper to perform, resulting in lower audit fees for the clientarrow_forward
- Tolerable error, is the maximum monetary error that the auditor is prepared to accept in the population and still conclude that audit objective has been achieved, is directly related to A.Sample size BAudit risk C.Materiality D.Expected errorarrow_forwardIn audit sampling applications, sampling risk isa. A characteristic of statistical sampling applications but not of nonstatistical applications.b. The probability that the audit team will fail to recognize erroneous accounting in the client’sdocumentation.c. The probability that accounting misstatements will arise in transactions and enter theaccounting system.d. The probability that an audit team’s conclusion based on a sample might be differentfrom the conclusion based on an audit of the entire population.arrow_forward.What is the effect on sample size for substantive procedures of an increase in the total error that the auditor is willing to accept increase decrease negligible effect no effectarrow_forward
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