Question

1. Which of the following would have the greatest chance of resulting in a lawsuit against the auditor?

A. Incorrect rejection of an account balance

B. Incorrect acceptance of an account balance

C. A type one error

D. Using variables sampling to determine the correct balance in accounts payable

2. An account balance is $300,000 and there are 25 items in the account, six of which have balances that equal or exceed $15,000. The auditor plans to use a monetary-unit sampling plan with systematic sample selection. To ensure that all accounts with balances of at least $15,000 are selected, the sampling interval should be:

A. 6

B. 20

C. 12,000

D. 15,000

3. If, compared to last year, the expected population deviation rate increased and the population total went from 12,000 down to 10,000, the current year sample size would

A. Increase

B. Decrease

C. Unable to determine

D. No effect on sample size since they offset

4. In attribute sampling which of the following statements should be true?

A. The tolerable rate is lower than the expected rate of deviations

B. The tolerable rate is higher than the expected rate of deviations

C. The tolerable rate is always equal to the expected rate of deviations

D. None of the above statements is true

5. Which of the following would likely result in a larger sample size?

A. Acceptable audit risk changes from .10 to .05

B. Control risk is increased

C. Detection risk decreases

D. All of the above would lead to a larger sample size

Answer 1

1. Option C. A type one error. A type one error would have the greatest chance of resulting in a lawsuit against the auditor

2. Option D. $15000. As the auditor required to include $15000 or more in the sampling plan. he needs to set sample interval to $15000

3. Option B Decrease. As the population has decreased from 12000 to 10000 , so the current sample size will also decrease

4. Option B. The tolerable rate is higher than the expected rate of deviations. In attribute sampling, tolerable risk and standard deviation of sample size will be taken and will be compared with the actual size. thus always tolerable risk will be higher than standard deviation

5.Option C. Detection risk decreases. The Remaining options provided are not in the hand of auditor and will not not have effect even if sample size increased.