Test 2 - Ch.8

Question 1

The risk of incorrect rejection relates to what?

Answer 1

Efficiency of the Audit

Question 2

Efficiency relates to what type of sampling error

Answer 2

Type 1

Question 3

Provides a means of mathematically measuring the sampling risk that results from examining only a part of the data is a benefit of what?

Answer 3

Statistical Sampling

Question 4

What are the three factors to determine sample size?

Answer 4

Tolerable Deviation rate, Confidence Level, Expected Deviation rate

Question 5

What two factors in determining sample size can an auditor control?

Answer 5

Tolerable Deviation Rate & Confidence Level

Question 6

The auditor most likely would give broader consideration to the implication of a deviation if it was…

Answer 6

The result of deliberate efforts to conceal environmental violdations

Question 7

A missing item in a sample should be treated as what?

Answer 7

A deviation

Question 8

The sum of the sample deviation rate and an appropriate allowance for sampling risk.

Answer 8

Upper Deviation Rate

Question 9

The population size has little or no effect on determining sample size except for very small populations when test controls (T/F)

Answer 9

True

Question 10

If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to…

Answer 10

Set control risk at the maximum without sampling

Question 11

Over reliance of controls occurs when the true deviation rate in the population was…

Answer 11

More than the deviation rate in the auditor’s sample

Question 12

TDR = 4.5%
UDR = 7%
Sample Deviation = 3%
Confidence Level = 95%
Allowance for Sampling risk = ?

Answer 12

4%

UDR = Sample Deviation + Allowance for Sampling Risk

Question 13

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to…

Answer 13

Measure the sufficiency of evidential matter obtained

Question 14

Sample to test internal controls are intended to provide a basis for an auditor to conclude whether…

Answer 14

The controls are operating effectively

Question 15

A recorded disbursement that does not show evidence of required approval may nevertheless be a transaction that is properly authorized and recorded is an example of what?

Answer 15

A deviation that does not necessarily result in a misstatement

Question 16

What combination of Desired Confidence level, Tolerable Deviation Rate, and Expected deviation rate would result in the greatest decrease in sample size in an attribute sample for a test of controls?

Answer 16

Desired Confidence Level - Decrease
TDR - Increase
Expected Population Deviation Rate - Decrease

Question 17

An auditor assesses control risk higher than necessary in what type of situation?

Answer 17

Computer UDR exceeds the TDR in the sample, but the Deviation rate for the Population is less than the TDR

Question 18

What type of relationship do sample size and tolerable deviation rate have?

Answer 18

Inverse

Question 19

Planned level of control risk should be modified when…

Answer 19

Sample Deviation Rate + Allowance for sampling Risk exceeds the TDR

Question 20

The deviation rate in the auditor’s sample is less than the TDR, but the deviation rate in the population exceeds the TDR is an example of what?

Answer 20

Type 2 error, Incorrect Acceptance