AT.

M-1406

AUDIT SAMPLING

1. The entire set of data from which a sample is selected and about which the auditor wishes
to draw conclusions is
A. Population
B. Sample
C. Sampling unit
D. Database

2. The risk that the auditors conclusion based on a sample may be different from the
conclusion if the entire population were subjected to the same audit procedure is
A. Sampling risk
B. Non-sampling risk
C. Risk of incorrect rejection
D. Risk of incorrect acceptance

3. Sampling risk that leads the auditor to conclude that controls are more effective than they
actually are is
A. Risk of assessing control risk too low
B. Risk of assessing control risk too high
C. Risk of incorrect rejection
D. Risk of incorrect acceptance

4. Sampling risk that leads the auditor to conclude that a material misstatement exists when
in fact it does not is
A. Risk of assessing control risk too low
B. Risk of assessing control risk too high
C. Risk of incorrect rejection
D. Risk of incorrect acceptance

5. Of the four erroneous conclusions from a sampling risk, the auditor is primarily
concerned with
A. Risk of assessing control risk too low
B. Risk of assessing control risk too high
C. Risk of incorrect rejection
D. Risk of incorrect acceptance
6. Which is not true of an Alpha risk in sampling?
I. It is the risk of assessing control risk too high or the risk of incorrect rejection.
II. It relates to the effectiveness of the audit.
III. It usually leads the auditor to additional work to establish that initial conclusions
were incorrect.
A. I and II only
B. I and III only
C. II and III only
D. I, II, and III

7. The likelihood of assessing control risk too high is the risk that the sample selected to test
controls
A. Does not support the auditors planned assessed level of control risk when the true
operating effectiveness of the control structure justifies such an assessment
B. Contains misstatements that could be material to the financial statements when
aggregated with misstatements in other account balances or transactions classes
C. Contains proportionately fewer monetary errors or deviations from prescribed
controls than exist in the balance or class as a whole
D. Does not support the tolerable error for some or all of managements assertions

8. A misstatement or deviation that is demonstrably not representative of misstatements or

deviations in a population
A. Sampling risk
B. Anomaly
C. Error
D. Corruption

9. The process of dividing a population into subpopulations, each of which is a group of

sampling units which have similar characteristics (often monetary value) is
A. Division
B. Stratification
C. Grouping
D. Characterization

10. The risk that the auditor reaches an erroneous conclusion for any reason not related to
sampling risk is
A. Sampling risk
B. Non-sampling risk
C. Audit risk
D. Detection risk

11. Which of the following does not constitute non-sampling risk?

A. Use of inappropriate audit procedures
B. Misinterpretation of audit evidence
C. Failure to recognize a misstatement or deviation
 D. Failure of a sample to represent the population

12. If the audit procedure is not applicable to the selected item, as when for example, a
voided check is selected while testing for evidence of payment authorization, which of
the following is incorrect?
A. The auditor shall treat the item as a deviation.
B. The auditor shall perform the audit procedure on a replacement item.
C. If the auditor is satisfied that the voiding of the check is proper, such an item does not
constitute deviation.
D. The replacement item, as the case may be, must be chosen by the auditor.

13. If the auditor is unable to apply the designed audit procedures, or suitable alternative
procedures, to a selected item
I. The auditor shall treat that item as a deviation from the prescribed control in the
case of tests of controls,
II. The auditor shall treat that item as a misstatement, in the case of tests of details
A. I only
B. II only
C. Both I and II
D. Neither I nor II

14. The decision whether to use statistical or non0statistical sampling depends upon the
A. Philippine Standards on Auditing
B. Auditors judgment
C. Size of the population
D. Generally Accepted Auditing Standards

15. An advantage of using statistical over non-statistical sampling methods in tests of

controls is that the statistical methods
A. Can more easily convert the sample into a dual-purpose test useful for substantive
testing
B. Eliminate the need to use judgment in determining appropriate sample sizes
C. Afford greater assurance than a non-statistical sample of equal size
D. Provide an objective basis for quantitatively evaluating sample risk

16. Which of the following is a characteristic of the statistical sampling approach?

I. Random selection of the sample items
II. The use of probability theory to evaluate sample results, including measurement
of sampling risk
A. I only
B. II only
C. Both I and II
D. Neither I nor II
17. S1. With statistical sampling, items are selected in a way that each sampling unit has a
known probability of being selected.
S2. With non-statistical sampling, judgment is used to select sample items.
A. True True
B. True False
C. False False
D. False True

18. Per PSA 530, the principal methods of selecting samples are (choose the exception)
A. Random selection
B. Systematic selection
C. Haphazard selection
D. Block selection

19. Which of the following contains incorrect description of methods of sampling/ selection
described?
A. Random selection is applied through random number generators, for example,
random number tables.
B. Monetary unit sampling is a type of value-weighted selection in which sample size,
selection and evaluation results in a conclusion in monetary amounts.
C. Haphazard selection is a statistical sampling technique in which the auditor selects the
sample without following a structured technique.
D. Block selection involved selection of a block(s) of contiguous items from within the
population.

20. In a systematic selection, the number of sampling units in the population is divided by the
sample size to give a sampling interval, for example 50, and having determined a starting
point within the first 50, each 50th sampling unit thereafter is selected. Which of the
following is incorrect about the systematic selection technique?
A. The starting point in this technique may be determined haphazardly.
B. The sample is more likely to be truly random if it is determined by use of a
computerized random number generator or random number tables.
C. The auditor would need to determine that sampling units within the population are not
structured in such a way that the sampling interval corresponds with a particular
pattern in the population.
D. If an audit procedure is not applicable on a unit in the sample selected, the auditor
treats it as an error.

21. Which is incorrect regarding stratification?

A. Audit efficiency is improved because its objective is to reduce the variability of items
within each stratum and therefore allow sample size to be reduced without increasing
sampling risk.
 B. In performing test of details, it allows greater audit effort to be directed to the larger
value items, as these items may contain the greatest potential misstatement in terms of
overstatement.
C. If, say, 20% of the items in a population makes up 905 of value of an account balance,
the auditor may decide to examine a sample of these items, evaluates the results of
this sample and reaches a conclusion on the 905 of value separately from the
remaining 105 (on which a further sample or other means of gathering audit evidence
will be used, or which may be considered immaterial).
D. The results of audit procedures applied to a sample of items within a stratum can be
projected to the entire population.

22. Per PSA 530, one benefit of this approach to defining the sampling unit is that audit effort
directed to the larger value items because they have a greater chance of selection, and can
result I smaller sample sizes.
A. Stratification
B. Value-weighted selection
C. Random selection
D. Haphazard selection

23. The expected population deviation rate of client billing errors is 3%. The auditor has
established a tolerable rate of 5%. In the review of client invoices the auditor should use
A. Stratified sampling
B. Variable sampling
C. Discovery sampling
D. Attribute sampling
24. Which of the following statistical sampling plans does not use a fixed sample size for
tests of controls?
A. Peso-unit sampling
B. Sequential sampling
C. PPS sampling
D. Variables sampling

25. Which of the following sampling methods would be used to estimate a numerical
measurement of a population, such as a peso value?
A. Attribute sampling
B. Stop-or-go sampling
C. Variables sampling
D. Random-number sampling

26. 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
A. Discovery sampling
B. Variables sampling
C. Random sampling
D. Peso-unit sampling
27. The relationship between the sampling risk that the auditor is willing to accept and the
sample size is selected is
A. Inverse
B. Direct
C. Parallel
D. Indeterminate

28. A monetary amount set by the auditor in respect of which the auditor seeks to obtain an
appropriate level of assurance that the monetary amount set by the auditor is not
exceeded by the actual misstatement in the population is
A. Tolerable misstatement
B. Tolerable rate of deviation
C. Anomaly
D. Expected misstatement

29. A rate of deviation from prescribed internal control procedures set by the auditor in
respect of which the auditor seeks to obtain an appropriate level of assurance that the rate
of deviation set by the auditor is not exceeded by the actual rate of deviation in the
population is
A. Tolerable misstatement
B. Tolerable rate of deviation
C. Anomaly
D. Expected misstatement

30. In attributes sampling, to support the initial assessment of control risk, the expected
deviation rate must be ______ than the deviation rate
A. Lower
B. Higher
C. Equal
D. Indeterminate

31. As a result of tests of controls, an auditor assessed control risk too low and decreased
substantive testing. This assessment occurred because the true deviation rate in the
population was
A. Less than the risk of assessing control risk too low, based on the auditors sample
B. Less than the deviation rate in the auditors sample
C. More than the risk of assessing control risk too low, based on the auditors sample
D. More than the deviation rate in the auditors sample

32. Which of the following combinations results in a decrease in sample size in a sample for
attributes?
Risk of assessing Tolerable rate Expected population
control risk too low deviation rate
A. Increase Decrease Increase
 B. Decrease Increase Decrease
C. Increase Increase Decrease
D. Increase Increase Increase

33. How would increases in tolerable misstatement and assessed level of control risk affect
the sample size in a substantive test of details?

Increase in tolerable misstatement Increase in assessed level of control risk

A. Increase sample size Increase sample size

B. Increase sample size Decrease sample size
C. Decrease sample size Increase sample size
D. Decrease sample size Decrease sample size

34. Which of the following statements is correct concerning statistical sampling in tests of
controls?
A. As the population size increases, the sample size should increase proportionately.
B. There is an inverse relationship between the expected population deviation rate and
the sample size.
C. In determining tolerable rate, an auditor considers detection risk and the sample size.
D. Deviations from specific internal control procedures at a given rate ordinarily result in
misstatements at a lower rate.

35. Per PSA 530, projection of sample results to the population, is only necessary in the case
of
A. Deviations (test of controls)
B. Misstatement (test of details)
C. A or B
D. Neither A nor B

36. When assessing the tolerable rate, the auditor should consider that, while deviations from
control procedures increase the risk of material misstatements, such deviations do not
necessarily result in errors. This explains why
A. A recorded disbursement that does not show evidence of required approval may
nevertheless be a transaction that is properly authorized and recorded.
B. Deviations would result in errors in the accounting records only if the deviations and
the errors occurred on different transactions.
C. Deviations from pertinent control procedures at a given rate ordinarily would be
expected to result in errors at a higher rate.
D. A recorded disbursement that is properly authorized may nevertheless be a transaction
that contains s material error.

37. If the expected deviation rate is 6% and the tolerable deviation rate is 9%, the allowance
for sampling risk is
 A. 6% B.9% C. 3% D. 15%

38. What is an auditors evaluation of a statistical sample for attributes when a test of fifty
documents results in three deviations if tolerable rate is 7%, the expected population
deviation rate is 5%, and the allowance for sampling risk is 2%?
A. Modify the planned assessed level of control risk because the tolerable rate plus the
allowance for sampling risk exceeds the expected population deviation rate.
B. Accept the sample results as support for the planned assessed level of control risk
because the sample deviation rate plus the allowance for sampling risk exceeds the
tolerable rate.
C. Accept the sample results as support for the planned assessed level of control risk
because the tolerable rate less the allowance for sampling risk equals the expected
population deviation rate.
D. Modify the planned assessed level of control risk because the sample deviation rate
plus the allowance for sampling risk exceeds the tolerable rate.