University of Michigan ACCOUNTING

ACC 575

CHAPTER 8

1)This involves the application of the procedures to less than 100% of the items within an account balance or class of transactions. This enables the auditor to obtain and evaluate audit evidence about some characteristics of the selected items in order to form an opinion about the characteristics of all items supporting an account balance or transaction class.

1. 1. Audit techniques
   2. Selective testing
   3. Audit sampling
   4. Specific identification

2. Audit sampling for substantive tests is appropriate when
   1. Analytical procedures are used
   2. The auditor wants to eliminate sampling risks
   3. A population contains small number of large value items
   4. Tests of details are performed

3. Audit sampling for test of control is generally appropriate when
   1. Control leaves evidence of performance
   2. Control leaves no evidence of performance
   3. 100% of the transactions is tested
   4. Examining specific high value items in the population

4. In a sampling application, the group of items about which the auditor wants to estimate some characteristic is called the

1. 1. Population                                                          c. Attribute of interest
   2. Sample                                                                 d. Sampling unit

5. Non-sampling error occur when the audit tests do not uncover existing exceptions in the
   1. Population
   2. Planning stage
   3. Sample
   4. Financial statement

6. PSA 530 identifies two general approaches to audit sampling. They are
   1. Random & nonrandom
   2. Statistical & nonstatistical
   3. Precision & reliability
   4. Risk and nonrisk

7. The relationship between sample size and the allowable sampling risks is
   1. Direct
   2. Inverse
   3. Sample deviation rate
   4. Expected deviation rate

8. Principal methods of sampling selection include all of the following except
   1. Haphazard
   2. Random number
   3. Systematic
   4. Statistical

9. A sample in which every possible combination of items in the population has a chance of constituting the sample is a
   1. Representative sample
   2. Random sample
   3. Statistical sample
   4. Judgment sample

10. The process which requires the calculation of an interval and them selects the items based on the size of the interval is
    1. Statistical sampling
    2. Systematic selection
    3. Random selection
    4. Computerized selection

11. A method of sampling in which all the items in the population are divided into two or more sub- population is
    1. Variable sampling
    2. Stratified sampling
    3. Attribute sampling
    4. Divisible sampling

12. If the auditor is concerned that a population may contain exceptions, the determination of a sample size sufficient to include at least one such exception is a characteristic of
    1. Discovery sampling
    2. Random sampling
    3. Variables sampling
    4. Peso-unit sampling

13. Which of the following statistical sampling plans does not use a fixed sample size for tests of controls?
    1. PPS sampling
    2. Value-weighted sampling
    3. Sequential sampling
    4. Variables sampling

14. Value weighted sampling is most appropriate when the auditor
    1. Anticipates understatement errors
    2. Expects no errors
    3. Anticipate overstatement errors
    4. Has assessed control risk at high level

15. The maximum amount of error in a population that the auditor is willing to accept is referred to as the
    1. Acceptable risk
    2. Tolerable error
    3. Expected error
    4. Tolerable materiality

16. The deviation rate the auditor expects to find in the population, before testing begins, is called the
    1. Tolerable deviation rate
    2. Computer upper deviation rate
    3. Sample deviation rate
    4. Expected deviation rate

17. Which of the following sampling methods would be most appropriate in performing tests of controls over authorization of cash disbursements
    1. Attributes
    2. Variables
    3. Ratio
    4. Stratified

18. In assessing sample risk, alpha risk relate to the
    1. Efficiency of the audit
    2. Selection of the sample
    3. Effectiveness of the audit
    4. Audit quality controls