Audit CPA Exam - Performing Further Procedures and
Obtaining Evidence || with 100% correct answers.
Sufficient audit evidence correct answers auditor needs to use professional judgement to
determine
Sufficiency is influenced by:
RMM (more risk = more evidence)
quality of the audit evidence (low quality = more
evidence)
Appropriate audit evidence correct answers Reliability - auditors direct personal knowledge and
observation, external evidence, internal evidence, oral evidence
Relevance - evidence related to the assertion under consideration. depends on the design of the
audit procedure and timing of the audit procedure
sampling correct answers statistical or nonstatistical
provide sufficient audit evidence and are acceptable under GAAS; both require professional
judgement
Attribute Sampling correct answers estimate a rate of occurrence, primarily used to test internal
controls. Methods Include:
discovery sampling
stop and go sampling
acceptance sampling
Variables Sampling correct answers used to estimate numerical value, typically used in
substantive testing. Methods include:
mean-per-unit estimation (MPU)
,ratio estimation
difference estimation
PPS Sampling correct answers hybrid method that uses attribute sampling theory to express a
conclusion in dollar amounts
sampling risk correct answers risk that the sample is not representative and the auditor's
conclusion would be different from the conclusion if they would have examined the whole
population
confidence interval correct answers Numerically, sampling risk is complement of reliability
(confidence level)
5% sampling risk reflects a 95% confidence level
Sampling Risks in Test of Controls (Attribute Sampling) correct answers Risk of assessing
control risk too low - not effective - risk of overreliance (upper right box)
Risk of assessing control risk too high - underreliance - not efficient (lower left box)
Sampling risks in substantive tests (Variables sampling) correct answers Risk of incorrect
acceptance - not effective (upper right box)
Risk of incorrect rejection - not efficient (lower left box)
Effect of Sampling Risk on the Audit correct answers Effectiveness - assessing CR too low and
the risk of incorrect acceptance - more critical because can result in the auditor mistakenly
relying on an ineffective control or unknowingly accepting a misstatement in the balance being
tested and issuing an inappropriate opinion
, Efficiency - risk of assessing control risk too high and risk of incorrect rejection - causes the
auditor to do more work than is really necessary
Steps in Sampling process correct answers 1. Define the objective - purpose of the test
2. define the population - aggregate group/set of items about which the auditor wishes to draw
conclusions
3. define the sampling unit - actual item/element
4. defining the attribute of interest - data to be collected
5. determine the sample size - statistical considerations and auditor's judgement
6. select the sample
7. evaluate the sample results
8. Document sampling procedures
Types of sampling correct answers random selection - best method for prenumbered population
systematic selection - every nth item (ineffective if population is systematically ordered)
stratification - divide the population into subpopulations based on strata
block or cluster - not a desirable approach
PPS - every nth dollar, uses a random start, automatically stratifies population but does not test
negative or 0 balances
Upper deviation rate (attribute sampling) = correct answers sample deviation rate + allowance
for sampling risk
Tolerable deviation rate for attribute sampling correct answers maximum rate of deviation the
auditor will tolerate without modifying planned reliance on the control
Obtaining Evidence || with 100% correct answers.
Sufficient audit evidence correct answers auditor needs to use professional judgement to
determine
Sufficiency is influenced by:
RMM (more risk = more evidence)
quality of the audit evidence (low quality = more
evidence)
Appropriate audit evidence correct answers Reliability - auditors direct personal knowledge and
observation, external evidence, internal evidence, oral evidence
Relevance - evidence related to the assertion under consideration. depends on the design of the
audit procedure and timing of the audit procedure
sampling correct answers statistical or nonstatistical
provide sufficient audit evidence and are acceptable under GAAS; both require professional
judgement
Attribute Sampling correct answers estimate a rate of occurrence, primarily used to test internal
controls. Methods Include:
discovery sampling
stop and go sampling
acceptance sampling
Variables Sampling correct answers used to estimate numerical value, typically used in
substantive testing. Methods include:
mean-per-unit estimation (MPU)
,ratio estimation
difference estimation
PPS Sampling correct answers hybrid method that uses attribute sampling theory to express a
conclusion in dollar amounts
sampling risk correct answers risk that the sample is not representative and the auditor's
conclusion would be different from the conclusion if they would have examined the whole
population
confidence interval correct answers Numerically, sampling risk is complement of reliability
(confidence level)
5% sampling risk reflects a 95% confidence level
Sampling Risks in Test of Controls (Attribute Sampling) correct answers Risk of assessing
control risk too low - not effective - risk of overreliance (upper right box)
Risk of assessing control risk too high - underreliance - not efficient (lower left box)
Sampling risks in substantive tests (Variables sampling) correct answers Risk of incorrect
acceptance - not effective (upper right box)
Risk of incorrect rejection - not efficient (lower left box)
Effect of Sampling Risk on the Audit correct answers Effectiveness - assessing CR too low and
the risk of incorrect acceptance - more critical because can result in the auditor mistakenly
relying on an ineffective control or unknowingly accepting a misstatement in the balance being
tested and issuing an inappropriate opinion
, Efficiency - risk of assessing control risk too high and risk of incorrect rejection - causes the
auditor to do more work than is really necessary
Steps in Sampling process correct answers 1. Define the objective - purpose of the test
2. define the population - aggregate group/set of items about which the auditor wishes to draw
conclusions
3. define the sampling unit - actual item/element
4. defining the attribute of interest - data to be collected
5. determine the sample size - statistical considerations and auditor's judgement
6. select the sample
7. evaluate the sample results
8. Document sampling procedures
Types of sampling correct answers random selection - best method for prenumbered population
systematic selection - every nth item (ineffective if population is systematically ordered)
stratification - divide the population into subpopulations based on strata
block or cluster - not a desirable approach
PPS - every nth dollar, uses a random start, automatically stratifies population but does not test
negative or 0 balances
Upper deviation rate (attribute sampling) = correct answers sample deviation rate + allowance
for sampling risk
Tolerable deviation rate for attribute sampling correct answers maximum rate of deviation the
auditor will tolerate without modifying planned reliance on the control
