CPA Auditing and Attestation (AUD) : Audit Sampling
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #1 : Materiality
Of the following, which best describes the concept of materiality?
Information that is not likely to influence the decision making of an investor
Information that directly impacts the income statement
Information that meets strict thresholds predetermined
Information that is likely to be viewed by a reasonable investor as altering the mix of available information
Information that is likely to be viewed by a reasonable investor as altering the mix of available information
According to the US Supreme Court, information is material if there is a substantial likelihood that the information would be viewed by a reasonable investor as having significantly altered the total mix of available information.
Example Question #2 : Materiality
Of the following, which benchmark would be utilized when considering the materiality of a single cash transaction?
Performance materiality
None of the answer choices are correct
Overall materiality
Deminimis
Deminimis
All of the answer choices are different thresholds, determined by experienced auditors. Analyzing a single transaction compared to a whole balance sheet account should use proper benchmarks.
Example Question #1 : Sampling
“Non-sampling risk” is:
The auditor will choose an incorrect sample
The sample size is too small
The sample size is too large
Errors caused that are unrelated to the sample
Errors caused that are unrelated to the sample
Non-sampling risk is unrelated to the sample itself. Typically, a non-sampling risk would involve the misapplication of audit procedures. This would be unrelated to the sample
Example Question #1 : Sampling
In the case of sampling risk:
Both a and b
Neither a or b
controls are more effective than they actually are
controls are less effective than they actually are
Both a and b
Both a and b are correct. This risk could be that controls are more effective than they actually are causing oversampling or less than they actually are causing under-sampling.
Example Question #1 : Sampling
Stratification is defined as:
Multiplying a population into alternate populations
Dividing a population into sub populations
Reducing the amount of the sample size
Increasing the amount of the sample size
Dividing a population into sub populations
In the concept of stratification, populations are divided into subsets. A probability sample is drawn from each group.
Example Question #2 : Sampling
For which of the following audit tests would an auditor most likely use attribute sampling?
Inspecting employee time cards for proper approval by supervisors
Selecting accounts receivable for confirmation of account balances
Examining invoices in support of the valuation of fixed asset additions
Making an independent estimate of the amount of a LIFO inventory
Inspecting employee time cards for proper approval by supervisors
Attribute sampling is used to test controls. Inspecting employee time cards for proper approval by supervisors is a test of controls. Controls often relate to authorization, validity, completeness, accuracy, classification, and proper period.
Example Question #71 : Cpa Auditing And Attestation (Aud)
While performing a test of details during an audit, an 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:
Assessing control risk too high
Incorrect rejection
Assessing control risk too low
Incorrect acceptance
Incorrect rejection
Erroneously concluding that an account balance is materially misstated is an example of incorrect rejection.
Example Question #4 : Sampling
When conducting testing of various data areas during an audit, the auditor should uniformly use the same sample selection procedures for each testing unit.
False, there is a set procedure for how to proceed by the AICPA
True, only when the client advises this
True, when it facilitates the audit
False, the auditor should assess the best way of sampling each data set
False, the auditor should assess the best way of sampling each data set
Each data set to be tested requires a customized well thought out sampling and testing approach that allows the auditor to examine testing areas properly.
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