Question

1. A monetary unit sample yields LCL=100k and UCL=300K, where M=500K, which is not correct?

a. The population is misstated

b. the auditor cannot conclude that the population is fairly stated

c. the population is misstated by a material amount

d. a 500k adjusting entry would be acceptable.

2. Complete the statement. The lower the risk of material misstatement?

a. The greater maximum tolerable misstatement

b. The later in the year that principal audit test procedures can be preformed

c. The smaller the sample size needed for substantive testing

d. The higher the audit risk required

3. Which, by itself, would be inconsistent with a higher risk of material misstatement?

a. Higher extent of substantive tests

b. Substantive testing earlier in year

c. Lower detection risk

d. Tighter [that is, smaller] required precision

4. Which assertion is most likely being tested when an auditor traces transactions from the shipping log to the sales register?

a. existence assertion

b. rights assertion

c. completeness assertion

d. valuation assertion

5. Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?

a. Review sales transactions for large and unreasonable amounts.

b. Observe whether the duties of the accounts receivable clerk are separate from handling cash.

c. Examine a sample of duplicate sales invoices for credit approval by the credit manager.

d. Review the aged schedule of accounts receivable to determine if receivables from officers are included

Answer 1

1. option B is the answer. may any of the sample from the total pouplation carries 500 value, which may not lie in the UCL and LCL. Hence the sample is out off process.

2. option C is correct. when the statements of materials are true and fair, the level of risk is low, then little sample is suffcient to measure its range.

3. option A is correct. when there are higher material misstatements, then the tests must be higher.

4. option C is the right answer, i.e. completeness assertion. it is useful to check the sample and then trace the inventory receiving reports to the inventory records to make sure the two reports match or not.

5. option D is the right answer.