Question

1. The accounts receivable of Smith Company have a total book value of $120,000. An auditor has selected an audit sample of accounts with a total book value of $1,000 and an audited value of $1,200.

Extrapolating this deviation over the entire population would result in an estimated total audited value of:

a.

$144,000

b.

$140,000

c.

$120,000

d.

$100,000

2. Which of the following is only applicable to a public company audit report?

a.	A public company report is addressed to the company's board of directors or audit committee

b.	A public company report indicates that the financial statements are the responsibility of company management

c.	A public company report includes the name of the audit firm

d.

A public company report refers to audit standards of the PCAOB

3. Which of the following is the best example of audit sampling referred to as "block selection"?

a. Testing all documents for a specified time period during an accounting year, such as all items for the month of June

b. Testing specific documents during the accounting year using a random number generator

c. Testing all documents in a specific strata after dividing the population into separate categories

d. Testing only documents that start with the numbers 1 or 6 throughout the entire population

Typically, the higher we set the tolerable rate of deviation, the lower the sample size for audit testing of the population.

a. True b. False

Answer 1

1.Extrapolation would result into the value as under-

2.answer is D .It is the only the audit report of Public Company which refers to the audit standards of PCAOB(Public Company Accounts Oversight Board)

3. answer is D. As in Block Selection the entire population From Which sample is to be selected is divided into blocks based on a uniform criteria( for Example block chosen in testing only those documents/bills which starts from 1 or 6.

4. The answer would be False as when the auditor sets a higher tolerable rate of deviation then probably his/her audit sample size would also increase as he would be less concerned about the low/small deviations