In which of the following cases would the auditor be more likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis?
When the measure of tolerable msistatement is Small, and error of frequency is expected to be high. WHY? This answer is correct because a small tolerable misstatement combined with a high misstatement frequency increases the auditor’s required sample size which may lead to the conclusion by the auditor that all items of the account should be examined.
An auditor examining inventory most likely would use variables sampling rather than attributes sampling to
Estimate whether the dollar amount of inventory is reasonable. Why? This answer is correct because variables sampling deals with dollar amounts (or quantities), and accordingly, this answer is correct because it involves the dollar amount of inventory. Attributes sampling addresses deviation rates from various controls.
If certain forms are not consecutively numbered
Systematic sampling may be appropriate. Because systematic sampling is a procedure where a random start is obtained and then every nth item is selected. For example, a sample of forty from a population of a thousand would require selecting every 25th item after obtaining a random start between items 1 through 25. Therefore, although the forms are not consecutively numbered, the use of systematic sampling may be appropriate.
Which of the following is included as part of the definition of audit sampling?
Evaluation of some characteristic. Why?This answer is correct because audit sampling is the application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.
If the size of the sample to be used in a particular test of attributes has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures
The auditor may or may not achieve desired allowance for sampling risk at the desired risk of incorrect acceptance This answer is correct because although the use of random sampling makes it possible to calculate statistical conclusions, the wrong size sample will affect the achieved allowance for sampling risk at the desired risk of incorrect acceptance. For example, a sample which is too small will lead to a larger allowance for sampling risk than desired bc of a larger standard of error of the mean.
For which of the following audit tests would a CPA most likely use attribute sampling?
Identifying entries posted to incorrect accounts. Why? This answer is correct because attribute sampling (used with tests of controls) addresses the frequency with which a control operates effectively—such as the proper posting of accounts.