Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Question
Chapter 8, Problem 20MCQ
To determine
Introduction:Sampling refers to testing some part of the entire population, based on some key features and symptoms, which can represent the entire sampling. This is a pre decided proportion of the population which is tested by the auditor.
To choose: Select the False option among the given options for use of statistical or non-statistical sampling method with regards to effectiveness of audit evidence, quality of measurement etc.
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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.
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
In using audit sampling for exception rates:
the auditor wants to know the most the exception rate is likely to be.
sampling error is the likelihood that the auditor will miss a monetary misstatement.
the upper limit of the interval estimate is known as the sampling risk.
CUER cannot be considered in the context of specific audit objectives.
Chapter 8 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 8 - Prob. 1TFQCh. 8 - Prob. 2TFQCh. 8 - Prob. 3TFQCh. 8 - Prob. 4TFQCh. 8 - Prob. 5TFQCh. 8 - Prob. 6TFQCh. 8 - Prob. 7TFQCh. 8 - Prob. 8TFQCh. 8 - Prob. 9TFQCh. 8 - Prob. 10TFQ
Ch. 8 - Prob. 11TFQCh. 8 - Prob. 12TFQCh. 8 - Prob. 13TFQCh. 8 - Prob. 14TFQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Prob. 18MCQCh. 8 - Prob. 19MCQCh. 8 - Prob. 20MCQCh. 8 - Prob. 21MCQCh. 8 - Refer to Exhibit 8.6. Assume a 5% risk of...Ch. 8 - Prob. 23MCQCh. 8 - Prob. 24MCQCh. 8 - Prob. 25MCQCh. 8 - Prob. 26MCQCh. 8 - Prob. 27MCQCh. 8 - Prob. 28MCQCh. 8 - Prob. 29RSCQCh. 8 - Prob. 30RSCQCh. 8 - Prob. 31RSCQCh. 8 - Prob. 32RSCQCh. 8 - Prob. 33RSCQCh. 8 - Prob. 34RSCQCh. 8 - Prob. 35RSCQCh. 8 - Prob. 36RSCQCh. 8 - Prob. 37RSCQCh. 8 - Prob. 38RSCQCh. 8 - Prob. 39RSCQCh. 8 - Prob. 40RSCQCh. 8 - Prob. 41RSCQCh. 8 - Prob. 42RSCQCh. 8 - Prob. 43RSCQCh. 8 - Prob. 44RSCQCh. 8 - Prob. 45RSCQCh. 8 - Prob. 46RSCQCh. 8 - Prob. 47RSCQCh. 8 - What is stratification? Distinguish between...Ch. 8 - Prob. 49RSCQCh. 8 - Prob. 50RSCQCh. 8 - Prob. 51RSCQCh. 8 - Prob. 52RSCQCh. 8 - Prob. 53RSCQCh. 8 - Prob. 54RSCQCh. 8 - Prob. 55RSCQCh. 8 - Prob. 56RSCQCh. 8 - Prob. 57RSCQCh. 8 - Prob. 58RSCQCh. 8 - Prob. 59RSCQCh. 8 - Prob. 60RSCQCh. 8 - Prob. 61RSCQCh. 8 - Prob. 62RSCQCh. 8 - Prob. 63RSCQ
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- 2. 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_forwardWhich 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_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_forward
- Auditors 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_forwards1: A stratified sample consist of sampling units selected without conscious bias. s2: All auditing procedures involve audit sampling. s3: A deviation from prescribed control procedures does not necessarily indicate the presence of monetary error A. all statements are true b. all statements are false c. s1 and s2 are true d. s1 and s3 are truearrow_forwards1: The only way to know with certainty whether a sample Is representative is to subsequently audit the entire population. s2: One way to control sampling risk is to increase the sample size. s3: Sampling risk results from the auditor's failure to recognize exceptions in transaction data. A. all statements are true b. all statements are false c. s1 and s2 are true d. s1 and s3 are truearrow_forward
- STATEMENT 1: The concept of audit sampling serves to discourage auditors from overauditing or underauditing the client's financial statements. STATEMENT 2: When performing tests of controls and substantive tests of details, the auditor is not required to examine all documentary evidence available. A. Only Statement 1 is incorrect B. Only Statement 1 is correct C. Both statements are incorrect D. Both statements are correctarrow_forwardStatistical sampling cannot be used to test all controlactivities. TRUE OR FALSE? WHY?arrow_forwardTRUE OR FALSE When sampling is used by an auditor, an element of uncertainty is present in the auditor's conclusion. When evaluating the results of specific items selected for testing, its effects must be projected to the whole population. In performing external confirmations, the management prepares the requests and receives and replies for communication to the auditor. As the use of going concern assumption is always relevant un audit, the auditor shall evaluate whether uncertainty exists as the company's ability to continue as going concern. Adverse key financial ratios and negative operating cash flows are some events that may cast doubt about the going concern of a company. In searching for unrecorded liabilities, the population of audit interest is the schedule of accounts payable at period end. Audit sampling refers to the application of audit procedures to less than 100% of the items in an account balance or class of transactions for the purpose of…arrow_forward
- When making a decision about the dollar amount in an account balance based on a sample, the audit team considers the risk of incorrect acceptance to be more serious than the risk of incorrect rejection becausea. The incorrect rejection decision impairs the efficiency of the audit.b. The audit team will do additional work and discover the misstatement of the incorrect decision.c. The incorrect acceptance decision impairs the effectiveness of the audit.d. Sufficient appropriate audit evidence will not have been obtained.arrow_forwardWhen the auditors have chosen to test a control, what relationship will the tolerable rate normally have when compared to the expected rate of deviations in the sample? Multiple Choice Exceed. Equal. Be less than. A Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardIn evaluating the results of audit sampling in test of details which sentence below is FALSE? A. When the projected misstatement plus anomalous misstatement exceeds tolerable misstatement, the sample does not provide a reasonable basis for conclusions about the population that has been tested. B. he auditor's best estimate of the misstatement of the population is the projected misstatement minus anomalous misstatement. C. The closer the projected misstatement plus anomalous misstatement is to tolerable misstatement, the more likely that actual misstatement in the population may exceed tolerable misstatement. D. The auditor's best estimate of the misstatement of the population is the projected misstatement plus anomalous misstatement.arrow_forward
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