EBK AUDITING AND ASSURANCE SERVICES
16th Edition
ISBN: 9780134067117
Author: Hogan
Publisher: VST
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Question
Chapter 15, Problem 24.2MCQ
To determine
Which of the following best illustrates the concept of sampling risk?
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Students have asked these similar questions
Which of the following is not an advantage of non-statistical sampling?
a) It allows an auditor to select a sample that they believe is appropriate.
b) It allows an auditor to measure sampling risk.
c) It is lower cost than statistical sampling.
d) It requires less staff training.
What are the risks if the auditor concludes controls are operating effectively based on the sample and Control Risk is set too low?
Risk of incorrect rejection is defined as _______.
the risk that the auditor concludes that a material misstatement does not exist when it does exist
the risk that the auditor concludes that a material misstatement exists when it does not exist
the risk that an auditor incorrectly rejects a client
the risk that management may reject the audit opinion issued by the auditor
An advantage of statistical sampling _______.
is that it allows an auditor to measure control risk
is that it allows an auditor to measure sampling risk
is that it allows an auditor to measure inherent risk
is that it is cheaper to perform, resulting in lower audit fees for the client
Chapter 15 Solutions
EBK AUDITING AND ASSURANCE SERVICES
Ch. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Prob. 11RQCh. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - Distinguish between the TER and the CUER. How is...Ch. 15 - Prob. 15RQCh. 15 - Prob. 16RQCh. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Prob. 20RQCh. 15 - Prob. 21RQCh. 15 - Prob. 22.1MCQCh. 15 - Prob. 22.2MCQCh. 15 - Prob. 22.3MCQCh. 15 - Prob. 23.1MCQCh. 15 - Prob. 23.2MCQCh. 15 - Prob. 23.3MCQCh. 15 - Prob. 24.1MCQCh. 15 - Prob. 24.2MCQCh. 15 - Prob. 24.3MCQCh. 15 - Prob. 25.1MCQCh. 15 - Prob. 25.2MCQCh. 15 - Prob. 25.3MCQCh. 15 - Prob. 27DQPCh. 15 - Lenter Supply Company is a medium-sized...Ch. 15 - Prob. 29DQPCh. 15 - Prob. 30DQPCh. 15 - Prob. 31DQPCh. 15 - Prob. 32DQPCh. 15 - Prob. 33DQPCh. 15 - Prob. 34DQPCh. 15 - Prob. 35DQPCh. 15 - Prob. 36CCh. 15 - Prob. 37ICA
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Similar questions
- Which of the following statements is not true with respect to nonstatistical sampling?a. It cannot be used in an audit conducted in accordance with generally accepted auditing standards.b. It considers a number of factors in determining the appropriate sample size.c. When using it, an individual makes some estimate of the characteristic of interest.d. It requires the use of judgment on the part of the individual performing the sampling application.arrow_forwardIt is important to recognize that audit sampling may be constructed on a nonstatistical basis.If the auditor uses statistical sampling, probability theory will be used to determine sample sizeand random selection methods to ensure each item or GHc1 in value of the population has thesame chance of selection. Non-statistical sampling is more subjective than statistical sampling,typically using haphazard selection methods and placing no reliance on probability theory.However, in certain circumstances statistical sampling techniques may be difficult to use. Theauditor will review the circumstances of each audit before deciding whether to use statisticalor non-statistical sampling a. Describe to what extent statistical sampling enhances the quality of the audit evidence.b. Explain how judgement is used in statistical and non-statistical sampling c. Explain what you understand by the following terms:(i) Random sampling(ii) Monetary unit sampling.arrow_forwardThe two types of sampling risks that auditors face include the risk of incorrect acceptance and the risk of incorrect rejection. What do each of these mean and how will each impact the audit process and the audit results? Which is considered the more important risk?arrow_forward
- Which one of the sentences below is FALSE? A. The risk of incorrect acceptance called beta risk has the consequence that the auditor may assume that the population is free of material misstatement. B. The risk of incorrect rejection is called alpha risk and has the consequence that the auditor may assume on the basis of sample results that a population is materially misstated when, in fact, it is not . C. The risk of incorrect acceptance is called beta risk. D. The risk of incorrect rejection very common in audit sampling is called beta risk.arrow_forward2. Which of the following is not true about the advantages of statistical sampling approach? * A. The auditor is in a better position to calculate sampling risks. B. Sample findings are evaluated in a more "scientific" way. C. The sample is more efficiently designed. D. The auditor is in a better position to control sampling risks. E. None of themarrow_forwardOrdinarily, risk assessment procedures do not involve the use ofaudit sampling. However, the auditor often plans and performs tests of controls concurrently with obtaining an understanding of the design of controls and determining whether they have been implemented. TRUE OR FALSE? WHY?arrow_forward
- Which of the following statements is false? A) Top-stratum items are population items whose book value likely exceed the Sampling Interval and would be all selected for examination and evaluation during the audit. B) Because the auditor knows the full amount of errors in the top stratum (since all items are evaluated), no estimate of errors or projection to the population for the errors in the top stratum is required. C) The auditor's evaluation of the most likely misstatements in the sample reflects the sum of the misstatements from the top-stratum and the projected misstatement derived from the each lower-stratum items D) None of the abovearrow_forwardAuditors must be aware of sampling risks because: A The risk of type 2 error due to increased sampling might be avoided by increasing tests of controlsB The risk of a type 2 error is that decreased sampling might be avoided by increasing the materiality thresholdC The risk of a type 1 error due to decreased sampling might be avoided by reducing the substantive testsD The risk of a type 2 error is that a decreased sample might have a greater impact on audit costsE The risk with a type 1 error is that increased sampling will not have a greater impact on the auditor's opinionarrow_forwardThe two types of sampling risks auditors face include the risk of incorrect acceptance and the risk of incorrect rejection. What do each of these mean and how will each impact the audit process and the audit results?arrow_forward
- An auditor who uses statistical sampling for attributes in testing internal controlsshould reduce the planned reliance on a prescribed control when the(1) sample exception rate plus the allowance for sampling risk equals the tolerable rate.(2) sample exception rate is less than the expected rate of exception used inplanning the sample.(3) tolerable rate less the allowance for sampling risk exceeds the sample exceptionrate.(4) sample exception rate plus the allowance for sampling risk exceeds the tolerablerate.arrow_forwardIn audit sampling applications, sampling risk isa. A characteristic of statistical sampling applications but not of nonstatistical applications.b. The probability that the audit team will fail to recognize erroneous accounting in the client’sdocumentation.c. The probability that accounting misstatements will arise in transactions and enter theaccounting system.d. The probability that an audit team’s conclusion based on a sample might be differentfrom the conclusion based on an audit of the entire population.arrow_forwardWhen the computed upper exception rate is greater than the tolerable exception rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to justify? Reduce the tolerable exception rate so as to accept the sample results. Expand the sample size and perform more tests. Revise the assessed control risk. Write a letter to management which outlines the control deficiencies.arrow_forward
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