Module G MC Q&A
1. Which component of the expanded audit risk model is most closely associated with
the risk of incorrect acceptance?
A. Analytical procedures risk
B. Risk of material misstatement
C. Nonsampling risk
D. Test of details risk - (correct answer)D
2. The sampling method used to examine a population when the auditor wants to
estimate a continuous amount (or value) of the population is
A. attributes sampling.
B. balance sampling.
C. discovery sampling.
D. variables sampling. - (correct answer)D
3. Which of the following would not be estimated using variables sampling?
A. The balance in the client's accounts receivable
B. The extent to which an internal control procedure is not functioning as intended
C. The amount of misstatement in a client's inventory
D. All of these would be estimated using variables sampling - (correct answer)B
,4. Which of the following courses of action would an auditor most likely follow in
planning a sample of cash disbursements if the auditor is aware of several unusually
large cash disbursements?
A. Set the tolerable misstatement at a lower level than originally planned.
B. Stratify the cash disbursements population so that the unusually large disbursements
are selected.
C. Increase the sample size to reduce the effect of the unusually large disbursements.
D. Continue to draw new samples until all the unusually large disbursements appear in
the sample. - (correct answer)B
5. The total amount of misstatement identified in a sample is referred to as the
A. projected misstatement.
B. tolerable misstatement.
C. actual misstatement.
D. incremental allowance for sampling risk. - (correct answer)C
6. Which of the following is not an advantage associated with monetary unit sampling
(MUS)?
A. MUS sampling methods typically include transactions or components reflecting
relatively large dollar amounts.
B. MUS sampling methods are more effective in identifying overstatement errors.
,C. MUS sampling methods provide a conservative (higher) estimate of misstatement in
the account balance or class of transactions.
D. MUS sampling methods typically result in relatively small sample sizes. - (correct
answer)C
7. The amount at which an item would be recorded assuming no mistakes in judgment
or incorrect applications of generally accepted accounting principles were made is the
A. audited value.
B. expected misstatement.
C. recorded value.
D. tolerable misstatement. - (correct answer)A
8. The auditor's sample would indicate that the client's account balance is fairly stated
when the _____ is less than the _____.
A. upper limit on misstatements; tolerable misstatement
B. actual misstatement; tolerable misstatement
C. tolerable misstatement; upper limit on misstatements
D. tolerable misstatement; actual misstatement - (correct answer)A
9. How does monetary unit sampling (MUS) ensure that larger dollar components are
selected for examination?
, A. MUS sampling requires the auditor to identify all items having a balance greater than
performance materiality prior to beginning the sample selection process.
B. MUS sampling requires the auditor to stratify the sample into larger and smaller
dollar components prior to beginning the sample selection process.
C. MUS sampling defines the sampling unit as an individual dollar within an account
balance or class of transactions.
D. MUS sampling selects components having larger balances in the prior audit. -
(correct answer)C
10. Why is the auditor more concerned with controlling the exposure to the risk of
incorrect acceptance than with the risk of incorrect rejection?
A. Only the risk of incorrect acceptance results in an incorrect decision by the auditor.
B. The risk of incorrect rejection is not related to the auditor's substantive procedures.
C. The risk of incorrect rejection can be controlled by performing substantive
procedures during the interim period.
D. The risk of incorrect acceptance may ultimately result in the auditor incorrectly
issuing an unmodified opinion on the client's financial statements. - (correct answer)D
11. Which of the following is not true with respect to the risk of incorrect acceptance?
A. This risk provides the auditor with an efficiency loss.
B. This risk results in the auditor making an incorrect conclusion about the client's
account balance or class of transactions.
1. Which component of the expanded audit risk model is most closely associated with
the risk of incorrect acceptance?
A. Analytical procedures risk
B. Risk of material misstatement
C. Nonsampling risk
D. Test of details risk - (correct answer)D
2. The sampling method used to examine a population when the auditor wants to
estimate a continuous amount (or value) of the population is
A. attributes sampling.
B. balance sampling.
C. discovery sampling.
D. variables sampling. - (correct answer)D
3. Which of the following would not be estimated using variables sampling?
A. The balance in the client's accounts receivable
B. The extent to which an internal control procedure is not functioning as intended
C. The amount of misstatement in a client's inventory
D. All of these would be estimated using variables sampling - (correct answer)B
,4. Which of the following courses of action would an auditor most likely follow in
planning a sample of cash disbursements if the auditor is aware of several unusually
large cash disbursements?
A. Set the tolerable misstatement at a lower level than originally planned.
B. Stratify the cash disbursements population so that the unusually large disbursements
are selected.
C. Increase the sample size to reduce the effect of the unusually large disbursements.
D. Continue to draw new samples until all the unusually large disbursements appear in
the sample. - (correct answer)B
5. The total amount of misstatement identified in a sample is referred to as the
A. projected misstatement.
B. tolerable misstatement.
C. actual misstatement.
D. incremental allowance for sampling risk. - (correct answer)C
6. Which of the following is not an advantage associated with monetary unit sampling
(MUS)?
A. MUS sampling methods typically include transactions or components reflecting
relatively large dollar amounts.
B. MUS sampling methods are more effective in identifying overstatement errors.
,C. MUS sampling methods provide a conservative (higher) estimate of misstatement in
the account balance or class of transactions.
D. MUS sampling methods typically result in relatively small sample sizes. - (correct
answer)C
7. The amount at which an item would be recorded assuming no mistakes in judgment
or incorrect applications of generally accepted accounting principles were made is the
A. audited value.
B. expected misstatement.
C. recorded value.
D. tolerable misstatement. - (correct answer)A
8. The auditor's sample would indicate that the client's account balance is fairly stated
when the _____ is less than the _____.
A. upper limit on misstatements; tolerable misstatement
B. actual misstatement; tolerable misstatement
C. tolerable misstatement; upper limit on misstatements
D. tolerable misstatement; actual misstatement - (correct answer)A
9. How does monetary unit sampling (MUS) ensure that larger dollar components are
selected for examination?
, A. MUS sampling requires the auditor to identify all items having a balance greater than
performance materiality prior to beginning the sample selection process.
B. MUS sampling requires the auditor to stratify the sample into larger and smaller
dollar components prior to beginning the sample selection process.
C. MUS sampling defines the sampling unit as an individual dollar within an account
balance or class of transactions.
D. MUS sampling selects components having larger balances in the prior audit. -
(correct answer)C
10. Why is the auditor more concerned with controlling the exposure to the risk of
incorrect acceptance than with the risk of incorrect rejection?
A. Only the risk of incorrect acceptance results in an incorrect decision by the auditor.
B. The risk of incorrect rejection is not related to the auditor's substantive procedures.
C. The risk of incorrect rejection can be controlled by performing substantive
procedures during the interim period.
D. The risk of incorrect acceptance may ultimately result in the auditor incorrectly
issuing an unmodified opinion on the client's financial statements. - (correct answer)D
11. Which of the following is not true with respect to the risk of incorrect acceptance?
A. This risk provides the auditor with an efficiency loss.
B. This risk results in the auditor making an incorrect conclusion about the client's
account balance or class of transactions.
