Question

9.In statistical sampling for tests of controls, determining the appropriate confidence level and desired precision are decisions made by the auditor that will affect sample size for the test. Which of the following should TYPICALLY not factor into sample size when performing statistical sampling for test of controls?
A. desired sampling risk
B. population size
C. audit resources available for execution of the sampling plan
D. objective of the test
E. Both b&c
F. Both c&d

10. An auditor’s tolerable deviation rate is 8% for a given control. The true deviation rate of the control is 15%. After testing the control, the auditor calculates a computed upper deviation rate of 5%. The auditor will most likely:
Properly conclude the control is unreliable
Improperly conclude the control is reliable
Perform additional tests of the control and ultimately discover it is unreliable using professional judgement
Increase substantive testing since the control is unreliable

11. A key advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to:
A. minimize nonsampling risk
B. quantify sampling risk
C. reduce the level of audit risk
D. promote consistency throughout audits of different accounts and different engagements

Answer questions:

6. Your non-for-profit audit client is under intense pressure to not report a profit in the current year. Which of the following assertions for revenues are you most concerned with?

A. Completeness
B. Classification
C. Occurrence
D. Rights and Obligations

7. Which of the following statements is FALSE?

A. When testing a given account, an auditor may need to collect a greater quantity of audit evidence for some assertions (e.g. existence) than for other assertions (e.g. completeness).

B. When investigating significant differences found during preliminary analytical procedures, inquiry alone is generally sufficient to satisfy the auditor’s requirements.

C. All of the auditor’s workpapers will contain clear documentation of each member of the audit team who worked on or reviewed the workpaper and the date on which that review was conducted.

D. Copies of important multi-year contracts with suppliers and customers are more likely to be found in an auditors Current File workpapers rather than their Permanent File workpapers.

8. Which of the following is TRUE regarding the tradeoff between test of controls and substantive testing? (For purposes of answering this question, assume the “public company” referenced in the answer choices is an accelerated filer.)

I. During a private company audit, it is possible for the auditor to follow a substantive approach and gain no audit evidence from test of controls during the course of the audit.

II. During a private company audit, it is possible for the auditor to follow a reliance approach and gain no audit evidence from substantive testing during the course of the audit.

III. During a public company audit, it is possible for the auditor to follow a substantive approach and gain no audit evidence from test of controls during the course of the audit.

IV. During a public company audit, it is possible for the auditor to follow a reliance approach and gain no audit evidence from substantive testing during the course of the audit.

A. Both I & II
B. Both I & III
C. I only
D. Both II & IV
E. II only

Answer 1

9. While performing statistical sampling of test of controls, audit resource available for execution of sampling plan is not a factor that auditor must consider to determine optimum sample size. Therefore, Option C is correct.

10. If Computed Upper Deviation Rate < Tolerable Deviation Rate, the auditor will come to the conclusion that the controls in place are not reliable. Hence to conclude the audit effectively the auditor will increase substantive testing since the control is unreliable. Option D is correct.

11. Key advantage of Statistical sampling over Non Statistical sampling is -

B Quantify sampling risk