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**Chapter** **09** - **Audit** **Sampling** **Chapter** **09** **Audit** **Sampling** True / False Questions Stratification **of** the population generally results in a more efficient **sampling** plan True False Discovery **sampling** is equivalent to an attributes **sampling** plan with a specified expected deviation rate **of** percent True False Increases in the number **of** deviations in an attributes sample results in an increase in the achieved upper deviation rate **of** the attributes sample True False The definition **of** a "deviation" for a **test** **of** a control should include only those deviations that result in misstatements in the financial statements True False Statistical **sampling** cannot be used to **test** all control activities True False Using ratio **and** difference estimation for a sample is an example **of** a dual purpose **test** True False Increases in the tolerable misstatement result in a decreased sample size when using meanper-unit estimation True False 9-1 **Chapter** **09** - **Audit** **Sampling** The mean book value **of** the items included in a mean-per-unit sample is not directly used in the evaluation **of** sample results True False When evaluating the results **of** a variables **sampling** plan, the projected misstatement is calculated **and** compared to the tolerable misstatement True False 10 Auditors project the misstatements found in the sample to the population when using statistical sampling, but not when using nonstatistical **sampling** True False Multiple Choice Questions The 10,000 accounts receivable **of** DEF Company have a total book value **of** $120,000 A CPA has selected **and** audited a sample **of** 100 accounts with a total book value **of** $1,000 **and** an audited value **of** $1,200 11 Using the difference estimation technique, estimated total audited value **of** the population is: A $100,000 B $120,000 C $140,000 D $144,000 12 Using the ratio estimation technique, the estimated total audited value **of** the population is: A $100,000 B $120,000 C $140,000 D $144,000 9-2 **Chapter** **09** - **Audit** **Sampling** 13 Using the mean-per-unit estimation technique, the estimated total audited value **of** the population is: A $100,000 B $120,000 C $140,000 D $144,000 14 Using the mean-per-unit estimation method an auditor has properly calculated the estimated total audited value **of** a population as $200,000 Her sample included 200 **of** the population's 40,000 items She found that, in her sample the average audited value was $1 less than the average book value What was the average audited value in the sample? A $4 B $5 C $6 D $10 15 Using difference estimation, an auditor has taken a sample **of** 200 from a population's 40,000 items; that population has a book value **of** $200,000 She found that in her sample the average audited value was $4.20, while the average book value was $5.20 What is the estimated total audited value **of** the population? A $160,000 B $161,538 C $168,000 D $200,000 16 Using ratio estimation, an auditor has taken a sample **of** 200 from a population's 40,000 items; that population has a book value **of** $200,000 She found that in her sample the average audited value was $4.20, while the average book value was $5.20 What is the estimated total audited value **of** the population? A $160,000 B $161,538 C $168,000 D $200,000 9-3 **Chapter** **09** - **Audit** **Sampling** 17 Using mean-per-unit estimation, an auditor has taken a sample **of** 200 from a population's 40,000 items; that population has a book value **of** $200,000 She found that in her sample the average audited value was $4.20, while the average book value was $5.20 What is the estimated total audited value **of** the population? A $160,000 B $161,538 C $168,000 D $200,000 18 If the projected misstatement in a nonstatistical **sampling** is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude? A Since the projected misstatement is less than the tolerable misstatement, the account is not misstated B Since the projected misstatement is less than the tolerable misstatement, the account is misstated C The risk is high that the account is materially misstated D The analysis has been improperly performed since the projected misstatement is unequal to the tolerable misstatement 19 A dual purpose **test** simultaneously A Addresses two different accounts B Functions as a substantive **test** **and** as a **test** **of** controls C Functions as an analytical procedure **and** a substantive **test** D Substantiates an ending balance **and** the transactions making up the balance The 1000 accounts receivable **of** Winco Company have a total book value **of** $20,000 (Average book value = $20) Bob Duffo, CPA, has selected **and** audited a sample **of** 50 accounts with the following mean values: Book value **of** $19 Audited value **of** $19.60 9-4 **Chapter** **09** - **Audit** **Sampling** 20 What is the estimated total audited value using mean per unit sampling? A $19,000 B $19,600 C $20,000 D $20,632 21 What is the estimated total audited value using difference estimation sampling? A $19,387 B $19,400 C $19,600 D $20,600 22 If all **other** factors specified in an attributes **sampling** plan remain constant, decreasing the tolerable rate **and** decreasing the risk **of** assessing control risk too low would have what effect on sample size? A Increase B Remain the same C Decrease D Indeterminate, depends upon exact change being made 23 If all **other** factors specified in an attributes **sampling** plan remain constant, decreasing the tolerable rate **and** increasing the estimated population deviation rate would have what effect on sample size? A Increase B Remain the same C Decrease D Indeterminate, depends upon exact change being made 24 An increase in the tolerable misstatement has what effect on the planned allowance for **sampling** risk? A Increases B Decreases C No effect D Indeterminate 9-5 **Chapter** **09** - **Audit** **Sampling** 25 Which **of** the following is not generally used for selecting samples? A Random number tables B Random number generators C Physical representation numbers D Systematic selection 26 In performing a **test** **of** a control last year the auditors specified a tolerable deviation rate **of** X percent This year the auditors have specified a tolerable rate **of** less than X percent Assuming that all **other** factors remain the same, which **of** the following is true regarding the relationship between this year's sample size compared to last year's sample size? A This year's sample is larger than last year's sample B This year's sample is smaller than last year's sample C This year's sample is equal to last year's sample D This year's sample is indeterminate in relation to last year's sample 27 The auditor using nonstatistical attributes sampling, but who nevertheless has chosen the sample in conformity with random selection procedures: A Need not consider the risk **of** assessing control risk too low B Has committed a nonsampling error C Will have to use discovery **sampling** techniques to evaluate the results D Should compare the deviation rate **of** the sample to the tolerable rate 28 When performing tests **of** controls over authorization **of** cash receipts, which **of** the following **sampling** methods would be most appropriate? A Attributes B Ratio C Stratified D Variables 29 Which **of** the following statistical **sampling** techniques involves taking samples in a series **of** stages? A Systematic **sampling** B Sequential **sampling** C Continuous **sampling** D Multiple location **sampling** 9-6 **Chapter** **09** - **Audit** **Sampling** 30 Which **of** the following is generally not true about statistical **sampling** as compared to nonstatistical sampling? A Statistical samples are more representative **of** the population B Statistical sample plans involve additional costs **of** evaluation C Statistical **sampling** allows a more objective evaluation **of** sample results D Statistical **sampling** may assist the auditors in designing more efficient samples 31 When using statistical sampling, which **of** the following need not be known to evaluate the results **of** an attributes sample? A Sample size B Risk **of** assessing control risk too low C Number **of** deviations in the population D Number **of** deviations found in the sample 32 When the auditors have decided to use statistical rather than nonstatistical sampling, a disadvantage is that: A Designing efficient samples is more difficult B The costs **of** training staff may be higher C **Sampling** without replacement must be used D Objectively evaluating results is impossible 33 Changing from a **sampling** plan using random selection with replacement to random selection without replacement has what effect on the required sample size? A Increases B Decreases C No effect D An indeterminate effect 34 When 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? A Exceed B Equal C Be less than D Indefinite 9-7 **Chapter** **09** - **Audit** **Sampling** 35 Increases in the planned allowance for **sampling** risk have what effect on required sample size? A Increases B Decreases C No effect D Indeterminate 36 When using **sampling** for tests **of** controls, which **of** the following **audit** consequences may follow? A If sample results indicate that the control is operating effectively, but in fact it is not, control risk will be assessed too low B If sample results indicate that the control is operating effectively, but in fact it is not, control risk will be assessed too high C If sample results indicate that the control is not operating effectively, but in fact it is operating effectively, the **audit** is likely to be faulty because **of** reduced substantive tests D If sample results indicate that the control is not operating effectively, but in fact it is operating effectively, control risk will be assessed too low 37 The auditors expect a population deviation rate **of** billing errors **of** two percent, **and** have established a tolerable rate **of** five percent The **sampling** approach most likely to be used is: A Attributes **sampling** B Stratified sequential **sampling** C Discovery **sampling** D None, as **sampling** does not seem appropriate in this situation 38 The auditors expect a population deviation rate **of** billing errors **of** eight percent, **and** have established a tolerable rate **of** five percent The **sampling** approach most likely to be used is: A Attributes **sampling** B Stratified random **sampling** C Variables **sampling** D None, as **sampling** does not seem appropriate in this situation 9-8 **Chapter** **09** - **Audit** **Sampling** 39 Which **of** the following may be used to reduce the risk **of** nonsampling errors? A Increasing the size **of** **audit** samples B Stratifying **audit** samples C Adequately planning **audit** samples D Using statistical **sampling** techniques 40 Which **of** the following types **of** risk is **of** critical importance to auditors in performing tests **of** controls? A The risk **of** assessing control risk too low B The risk **of** assessing control risk too high C The risk **of** incorrect acceptance D The risk **of** incorrect rejection 41 The auditors' failure to recognize a misstatement in an amount or a deviation in an internal control data processing procedure is described as a: A Statistical error B **Sampling** misstatement C Standard error **of** the mean D Nonsampling error 42 What effect does obtaining a sample with a standard deviation larger than that estimated during planning have on the adjusted allowance for **sampling** risk? A Increases B Decreases C No effect D Indeterminate The 2000 accounts receivable **of** ABC Company have a total book value **of** $40,000 Bob Rotter, CPA, has selected **and** audited a sample **of** 100 accounts with a total book value **of** $1,950 The audited value **of** the 100 accounts in the sample is $1,875 9-9 **Chapter** **09** - **Audit** **Sampling** 43 Using the mean-per-unit estimation technique, Rotter's estimate (to the nearest dollar) **of** year-end accounts receivable balance would be: A $37,500 B $38,462 C $38,500 D $41,600 44 Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) **of** year-end accounts receivable balance would be: A $37,500 B $38,462 C $38,500 D $41,600 45 Using the difference estimation technique, Rotter's estimate (to the nearest dollar) **of** yearend accounts receivable balance would be: A $37,500 B $38,462 C $38,500 D $41,600 46 The 3000 accounts receivable **of** DEF Company have a total book value **of** $60,000 Bob Smith, CPA, has selected **and** audited a sample **of** 100 accounts with a total book value **of** $2,100 Using the difference estimation technique, Smith has properly estimated a projected misstatement **of** an overstatement **of** $6,000 for the entire population The audited value **of** Smith's sample is: A $1,700 B $1,800 C $1,900 D $2,300 9-10 **Chapter** **09** - **Audit** **Sampling** 46 The 3000 accounts receivable **of** DEF Company have a total book value **of** $60,000 Bob Smith, CPA, has selected **and** audited a sample **of** 100 accounts with a total book value **of** $2,100 Using the difference estimation technique, Smith has properly estimated a projected misstatement **of** an overstatement **of** $6,000 for the entire population The audited value **of** Smith's sample is: A $1,700 B $1,800 C $1,900 D $2,300 Difficulty: Hard 47 The 3000 accounts receivable **of** DEF Company have a total book value **of** $60,000 Bob Smith, CPA, has selected **and** audited a sample **of** 100 accounts with a total book value **of** $2,100 Using the difference estimation technique, Smith has properly estimated a projected misstatement **of** a $9,000 overstatement for the entire population The estimated total audited value **of** the population is: A $51,000 B $58,000 C $60,000 D $69,000 Difficulty: Medium 48 The 4000 accounts receivable **of** GHI Company have a total book value **of** $60,000 Bob Smith, CPA, has selected **and** audited a sample **of** 100 accounts with a total book value **of** $1,600 Using the mean-per-unit estimation technique, Smith has properly estimated a projected misstatement **of** a $8,000 overstatement for the entire population The audited value **of** Smith's sample is: A $1,300 B $1,400 C $1,600 D $1,800 Difficulty: Hard 9-33 **Chapter** **09** - **Audit** **Sampling** 49 Which **of** the following is a correct statement with respect to evaluating results when using nonstatistical **sampling** for substantive tests? A When the projected misstatement exceeds the tolerable misstatement, the auditor should conclude that the population is not misstated B The closer the projected misstatement is to the tolerable misstatement, the higher the risk **of** material misstatement C When the projected misstatement is equal to zero, the auditors may conclude with certainty that no misstatements exist in the account D When the projected misstatement percentage exceeds the risk **of** incorrect acceptance the auditors will generally conclude that the population is materially misstated Difficulty: Medium 50 Assume a mean-per-unit estimation variables **sampling** application with a tolerable misstatement **of** $70,000 **and** a book value **of** $700,000 After performing the **sampling** plan, the auditors calculated an adjusted allowance for **sampling** risk **of** $45,000 **and** a point estimate **of** the population's total audited value to be $650,000 Based on these results, the auditor would: A Because the tolerable misstatement exceeds the adjusted allowance for **sampling** risk, conclude that the population does not contain a material misstatement B Because the total audited value ± tolerable misstatement includes the book value, conclude that the population does not contain a material misstatement C Because the tolerable misstatement exceeds the adjusted allowance for **sampling** risk, conclude that there is too great a risk that the account balance is materially misstated D Because the total audited value ± adjusted allowance for **sampling** risk does not include the book value, conclude that there is too great a risk that the account balance is materially misstated Difficulty: Hard 9-34 **Chapter** **09** - **Audit** **Sampling** 51 Assume a mean-per-unit estimation variables **sampling** application with a tolerable misstatement **of** $70,000 **and** a book value **of** $700,000 After performing the **sampling** plan, the auditors calculated an adjusted allowance for **sampling** risk **of** $45,000 **and** a point estimate **of** the population's total audited value to be $640,000 The projected misstatement based on this sample is: A $ 5,000 B $45,000 C $60,000 D $70,000 Difficulty: Medium 52 The auditors have audited a sample with a standard deviation **of** audited values larger than they had originally estimated In this situation, to maintain the risk **of** incorrect acceptance at its predetermined level without increasing the size **of** the sample, which **of** the following statements is correct? A The adjusted allowance for **sampling** risk will be smaller than had been planned B The adjusted allowance for **sampling** risk will be larger than had been planned C The risk **of** incorrect rejection will necessarily decrease D The size **of** the population must be decreased Difficulty: Hard 53 In the past, the auditors have found that the book value **of** a receivable account has been related to the amount the account is misstated (i.e., large accounts have large misstatements **and** small accounts have small misstatements) Which **of** the following techniques is most likely to be efficient? A Mean-per-unit estimation B Ratio estimation C Difference estimation D Sequential **sampling** estimation Difficulty: Medium 9-35 **Chapter** **09** - **Audit** **Sampling** 54 Which **of** the following statements is correct concerning the use **of** nonstatistical **sampling** for substantive tests? A Its use is generally acceptable only for populations with an immaterial book value B It requires the use **of** structured sample size selection techniques to be acceptable C It may be especially useful in circumstances in which the combination **of** inherent **and** control risk is at the maximum level D Results will be projected to the population Difficulty: Medium 55 Which **of** the following situations will result in the auditors concluding that the risk **of** material misstatement is too high when using nonstatistical **sampling** for substantive tests? A The projected misstatement exceeds the tolerable misstatement B The allowance for **sampling** risk exceeds the projected misstatement C The risk **of** incorrect acceptance exceeds the risk **of** incorrect rejection D The tolerable misstatement exceeds the sample net misstatement Difficulty: Hard 56 During the final planning **of** the accounts receivable program a CPA specified a tolerable misstatement **of** $30,000, instead **of** the $20,000 contained in the preliminary **audit** program What would be the impact **of** this change? A A decrease in population standard deviation B An increase in sample standard deviation C An increase in required sample size D A decrease in the required sample size Difficulty: Medium 9-36 **Chapter** **09** - **Audit** **Sampling** 57 Which **of** the following is an advantage **of** systematic selection over random number selection? A It provides a stronger basis for statistical conclusions B It enables the auditor to use the more efficient "sampling with replacement" tables C There may be correlation between the location **of** items in the population, the feature **of** **sampling** interest, **and** the **sampling** interval D It does not require establishment **of** correspondence between random numbers **and** items in the population Difficulty: Medium Source: AICPA 58 Statistical **sampling** generally may be applied to **test** internal control when the client's internal control procedures: A Depend primarily on appropriate segregation **of** duties B Are carefully reduced to writing **and** are included in client accounting manuals C Leave an **audit** trail in the form **of** evidence **of** compliance D Enable the detection **of** material fraud in the accounting records Difficulty: Medium Source: AICPA 59 Which **of** the following statements is correct about the sample size in statistical **sampling** when testing internal controls? A The auditor should consider the tolerable rate **of** deviation from the controls being tested in determining sample size B As the likely rate **of** deviation decreases, the auditor should increase the planned sample size C The allowable risk **of** assessing control risk too low has no effect on the planned sample size D **Of** all the factors to be considered, the population size has the greatest effect on the sample size Difficulty: Medium Source: AICPA 9-37 **Chapter** **09** - **Audit** **Sampling** 60 To determine sample size in an attribute **sampling** application, what must be specified? A Population mean, expected error rate, allowance for **sampling** risk B Allowance for **sampling** risk, risk **of** assessing control risk too low, standard deviation C Allowance for **sampling** risk, risk **of** assessing control risk too low, expected deviation rate D Population mean, standard deviation, allowance for **sampling** risk Difficulty: Hard Source: IIA 61 The tolerable deviation rate in **sampling** for tests **of** controls is: A Used to determine the probability **of** the auditor's conclusion based upon reliance factors B The probability that the financial statements are not materially in error C A measure **of** the reliability **of** substantive tests D The rate the auditor will tolerate without modifying the planned assessment **of** control risk Difficulty: Easy 62 In testing accounts receivable, an auditor sends out positive confirmation requests to 100 randomly selected customers A customer returns the confirmation indicating that the balance is correct when, in fact, the balance is overstated This is an example of: A Projected misstatement B **Sampling** error C Standard error D Nonsampling error Difficulty: Medium Source: IIA 9-38 **Chapter** **09** - **Audit** **Sampling** 63 An auditor wishes to estimate inventory shrinkage by weighing a sample **of** inventory items From experience, the auditor knows that a few specific items are subject to unusually large amounts **of** shrinkage In using statistical sampling, the auditor's best course **of** action is to: A Eliminate any **of** the items known to be subject to unusually large amounts **of** shrinkage B Increase the sample size to lessen the effect **of** the items subject to unusually large amounts **of** shrinkage C Stratify the inventory population so that items subject to unusually large amounts **of** shrinkage are reviewed separately D Continue to draw new samples until a sample is drawn which includes none **of** the items known to be subject to large amounts **of** shrinkage Difficulty: Hard Source: IIA 64 If all **other** factors specified in an attributes **sampling** plan remain constant, changing the specified tolerable rate from 6% to 10%, **and** changing the specified risk **of** assessing control risk too low from 3% to 7% would cause the required sample size to: A Increase B Remain the same C Decrease D Change by 4% Difficulty: Hard Source: AICPA 65 Which **of** the following factors does an auditor need to consider in planning a particular **audit** sample for a **test** **of** control? A Number **of** items in the population B Total dollar amount **of** the items to be sampled C Acceptable level **of** risk **of** assessing control risk too low D Tolerable misstatement Difficulty: Medium Source: AICPA 9-39 **Chapter** **09** - **Audit** **Sampling** 66 When using a statistical **sampling** plan, the auditors would probably require a smaller sample if the: A Population increases B Desired allowance for **sampling** risk decreases C Desired risk **of** incorrect acceptance increases D Expected deviation rate increases Difficulty: Medium Source: AICPA 67 Which **of** the following statements is correct concerning statistical **sampling** in tests **of** controls? A The population size has little effect on determining sample size except for very small populations B The expected population deviation rate has little or no effect on determining sample size except for very small populations C As the population size doubles, the sample size also should double D For a given tolerable rate, a larger sample size should be selected as the expected population deviation rate decreases Difficulty: Medium Source: AICPA 68 An advantage **of** using statistical **sampling** techniques is that such techniques: A Mathematically measure risk B Eliminate the need for judgmental decisions C Define the values **of** allowance for **sampling** risk **and** tolerable misstatement required to provide **audit** satisfaction D Have been established in the courts to be superior to judgmental **sampling** Difficulty: Medium Source: AICPA 9-40 **Chapter** **09** - **Audit** **Sampling** 69 In assessing **sampling** risk, the risk **of** incorrect rejection **and** the risk **of** assessing control risk too high relate to the: A Efficiency **of** the **audit** B Effectiveness **of** the **audit** C Selection **of** the sample D **Audit** quality controls Difficulty: Medium Source: AICPA 70 When performing a **test** **of** a control over cash disbursements, a CPA may use a systematic **sampling** technique with a start at any randomly selected item The biggest disadvantage **of** this type **of** **sampling** is that the items in the population: A Must be recorded in a systematic pattern before the sample can be drawn B May occur in a systematic pattern **and** destroy the sample randomness C May systematically occur more than once in the sample D Must be systematically replaced in the population after **sampling** Difficulty: Easy Source: AICPA 71 While performing a substantive **test** **of** details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated It was, in fact, not materially misstated This situation illustrates the risk of: A Incorrect acceptance B Incorrect rejection C Assessing control risk too high D Assessing control risk too low Difficulty: Medium Source: AICPA 9-41 **Chapter** **09** - **Audit** **Sampling** 72 An auditor plans to examine a sample **of** 20 checks for counter signatures as prescribed by the client's control procedures One **of** the checks in the chosen sample **of** 20 cannot be found The auditor should consider the reasons for this limitation and: A Evaluate the results as if the sample size had been 19 B Treat the missing check as a deviation for the purpose **of** evaluating the sample C Treat the missing check in the same manner as the majority **of** the **other** 19 checks, i.e., countersigned or not D Choose another check to replace the missing check in the sample Difficulty: Medium Source: AICPA 73 There are many kinds **of** statistical estimates that an auditor may find useful, but basically every statistical estimate in **auditing** is **of** either a quantity or **of** an error rate The statistical terms that roughly correspond to "quantities" **and** "occurrence rate", respectively, are: A Attributes **and** variable B Variables **and** attributes C Constants **and** attributes D Constants **and** variables Difficulty: Easy Source: AICPA 74 Which **of** the following best illustrates the concept **of** **sampling** risk? A A randomly chosen sample may not be representative **of** the population as a whole on the characteristic **of** interest B An auditor may select **audit** procedures that are not appropriate to achieve the specific objective C An auditor may fail to recognize deviations in the documents examined for the chosen sample D The documents related to the chosen sample may not be available for inspection Difficulty: Easy Source: AICPA 9-42 **Chapter** **09** - **Audit** **Sampling** 75 Which **of** the following statistical selection techniques is least desirable for use by an auditor? A Systematic selection B Stratified selection C Block selection D Sequential selection Difficulty: Medium Source: AICPA 76 Various factors influence the sample size for a substantive **test** **of** details **of** an account balance All **other** factors being equal, which **of** the following would lead to a larger sample size? A Lower assessment **of** control risk B Greater reliance on analytical procedures C Smaller expected frequency **of** misstatements D Smaller measure **of** tolerable misstatement Difficulty: Hard Source: AICPA 77 An important statistic to consider when using a statistical **sampling** **audit** plan is the population variability The population variability is measured by the: A Sample mean B Standard deviation C Standard error **of** the sample mean D Estimated population total minus the actual population total Difficulty: Easy Source: AICPA 9-43 **Chapter** **09** - **Audit** **Sampling** 78 In variables estimation sampling, the sample standard deviation is used to calculate the A Point estimate **of** central tendency B Tainting **of** the sample interval C Risk **of** incorrect acceptance D Adjusted allowance for **sampling** risk Difficulty: Easy Source: AICPA 79 Use **of** the ratio estimation **sampling** technique to estimate dollar amounts is inappropriate when: A The total book value is known **and** corresponds to the sum **of** all the individual book values B A book value for each sample item is unknown C There are some observed differences between audited values **and** book values D The audited values are nearly proportional to the book value Difficulty: Medium Source: AICPA Essay Questions 80 **Audit** **sampling** is used in conjunction with many **audit** tests, **and** may be performed on a statistical or nonstatistical basis a Define the term **audit** **sampling** b List **and** explain two advantages **of** the use **of** statistical **sampling** as compared to nonstatistical **sampling** a **Audit** **sampling** is performing a **test** on less than 100 percent **of** an **audit** population to make a conclusion about a characteristic **of** the population b Statistical **sampling** may assist the auditors in (only two required): • Designing efficient samples • Measuring the sufficiency **of** the evidence obtained • Objectively evaluating sample results (measuring **sampling** risk) Difficulty: Medium 9-44 **Chapter** **09** - **Audit** **Sampling** 81 Teal Corporation has 2,000 accounts receivable, with a total book value **of** $200,000 Ricardo Ramaro, CPA, has selected **and** audited a sample **of** 100 **of** the accounts with a combined book value **of** $10,100; the total **of** their audited values was $11,000 Using the mean-per-unit method, calculate the: a Accounts receivable estimated audited value b Projected misstatement a The accounts receivable estimated audited value is calculated as: b The projected misstatement is calculated as the difference between the estimated total audited value **and** the book value, calculated as follows: Difficulty: Medium 9-45 **Chapter** **09** - **Audit** **Sampling** 82 The auditors are using mean-per-unit **sampling** to evaluate the reasonableness **of** the book value **of** the accounts receivable **of** Smith, Inc Smith has 10,000 receivable accounts with a total book value **of** $800,000 The auditors estimate the population's standard deviation as being equal to $25 After examining the overall **audit** plan, the auditors believe that the account's tolerable misstatement is $40,000, **and** that a risk **of** incorrect rejection **of** 10 (risk coefficient = 1.64) **and** a risk **of** incorrect acceptance **of** 15 (risk coefficient = 1.04) should be used Required: a Calculate the required sample size Now ignore your sample size calculation in part "a," **and** assume that your answer was a sample size **of** 289 (the square root **of** 289 is 17) **and** that you obtained the following results: Average audited value **of** items in sample: $76 Average book value **of** items in sample: $78 Standard Deviation in the sample (audited values): $24 Standard Deviation in the sample (book values): $26 b Using mean-per-unit sampling, calculate the projected misstatement for the population c Using mean-per-unit sampling, calculate the adjusted allowance for **sampling** risk **and** use it to form a statistical conclusion concerning the book value **of** the population ($800,000) That is, calculate an interval **and** either "accept" or "reject" the client's book value 9-46 **Chapter** **09** - **Audit** **Sampling** Difficulty: Hard 9-47 ... selected and audited a sample of 50 accounts with the following mean values: Book value of $ 19 Audited value of $ 19. 60 9- 25 Chapter 09 - Audit Sampling 20 What is the estimated total audited value... basis a Define the term audit sampling b List and explain two advantages of the use of statistical sampling as compared to nonstatistical sampling 9- 19 Chapter 09 - Audit Sampling 81 Teal Corporation... sample of 50 accounts with the following mean values: Book value of $ 19 Audited value of $ 19. 60 9- 4 Chapter 09 - Audit Sampling 20 What is the estimated total audited value using mean per unit sampling?

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