cpa audit review ch 15 review 4

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  1. When using statistical sampling for testing the effectiveness of internal controls, an auditor’s evaluation would include a statistical conclusion concerning whether
    Procedural deviations in the population were within an acceptable range.

    The auditor uses attribute sampling to test the effectiveness of controls. The auditor considers the occurrence rate of deviations in the population. Attribute sampling enables the auditor to estimate the occurrence rates of deviations and to determine whether the estimated rates are within acceptable ranges.
  2. An auditor initially planned to use unrestricted random sampling with replacement in the audit of accounts receivable. Later, the auditor decided to use unrestricted random sampling without replacement. As a result of this decision, the sample size should

    Unrestricted random sampling means that each item in the population has an equal and nonzero chance of being selected. Sampling with replacement means that an item may be included more than once in the sample. Sampling without replacement removes an item from the population after selection. Thus, sampling without replacement uses information about the population more efficiently. It results in a smaller sample, if other things are held constant, because the sample size formula for sampling with replacement is multiplied by the finite population correction factor (always less than 1.0).
  3. What is an auditor’s evaluation of a statistical sample for attributes when a test of 50 documents results in 3 deviations if the tolerable rate is 7%, the expected population deviation rate is 5%, and the allowance for sampling risk is 2%?
    Modify the assessed risk of material misstatement because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.

    The sample has a 6% (3 ÷ 50) deviation rate. The auditor’s achieved upper deviation limit is 8% (6% + the 2% allowance for sampling risk). The allowance for sampling risk may be calculated from a standard table as the difference between the upper deviation limit and the sample rate. However, the allowance is given. Thus, the true deviation rate could be as large as 8% and exceed the tolerable rate. Accordingly, the auditor should revise the assessed risk of material misstatement for the relevant assertions and possibly alter the nature, timing, and extent of substantive procedures.
  4. An auditor discovers that an account balance believed not to be materially misstated based on an audit sample was materially misstated based on the total population of the account balance. This is an example of which of the following sampling types of risks?
    Incorrect acceptance.

    An auditor is concerned with two aspects of sampling risk in performing substantive tests of details: the risk of incorrect acceptance and the risk of incorrect rejection. The risk of incorrect acceptance is the risk that an auditor erroneously concludes that a material misstatement does not exist when, in fact, it does.
  5. The sample size of a test of controls varies inversely with
    Tolerable Population Deviation Rate

    The expected population deviation rate directly affects the sample size. As it increases, the sample size increases. However, the tolerable population deviation rate varies inversely with sample size. As it decreases, the sample size increases.
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cpa audit review ch 15 review 4
cpa audit review ch 15 review 4
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