AUD 3

Question 1

Sample size will increase when:

Answer 1

Direct relationship

1. Expected misstatements increase
2. Large population variability
3. Greater assessed level of risk

Question 2

Sample size will decrease when:

Answer 2

Inverse relationship

1. Higher tolerable misstatements
2. Higher Acceptable level of risk

Question 3

Type I error

Answer 3

1. Underreliance on controls
2. Incorrect rejection of the fairness of an account balance
3. Risk of assessing control risk too high
4. Efficiency

Question 4

Type II Error

Answer 4

1. Over-reliance on controls
2. Incorrect acceptance of the fairness of an account balance
3. Risk of assessing control risk too low
4. Effectiveness

Question 5

Statistical sampling allows an auditor to:

Answer 5

1) design an efficient sample;
2) measure the sufficiency of the evidential matter obtained
3) evaluate the sample results

Question 6

Attribute sampling is used

Answer 6

To reach a conclusion about a population in terms of a rate of occurrence (quantifiable)

Question 7

Attributes sampling

Answer 7

Testing internal control

Question 8

In a test of controls

Answer 8

The auditor compares the tolerable rate (the maximum rate of deviations that the auditor would be willing to accept without altering the planned assessment of control risk) to the achieved upper precision limit (the maximum deviation rate per the sample)

Question 9

If the achieved upper precision limit is greater than the tolerable rate

Answer 9

The control cannot be relied upon and the control risk assessment will be increased

Question 10

Tolerable rate

Answer 10

The maximum rate of deviations that the auditor would be willing to accept without altering the planned assessment of control risk

Question 11

Achieved upper precision limit

Answer 11

The maximum deviation rate per the sample