ACCY 405 Final Exam Review (updated)
questions & answers
What is the relationship between sample size and sampling risk? - correct answer ✔✔inverse
relationship
- bigger sample size, lower risk
what is sampling risk? - correct answer ✔✔the possibility that the sample drawn is NOT representative
of the population
- auditor will reach incorrect conclusion about account balances based on the sample
what are the steps in the attribute sampling process (7 steps)? - correct answer ✔✔1. State the
objectives of the procedure/test
2. Define the population characteristic (sampling unit)
3. Determine the Sample Size (ARIA, TDR, EDR)
4. Select Sample
5. Perform Audit Procedures
6. Determine Sample Deviation and Upper Deviation Rate
7. Final Conclusions
How do you calculate Sample Deviation Rate? - correct answer ✔✔# of exceptions in the sample /
sample size
What happens if UDR < TDR in an attribute sample process? - correct answer ✔✔results SUPPORT
original assessment
- controls operate effectively
What happens if UDR > TDR in an attribute sample process? - correct answer ✔✔results DO NOT
SUPPORT original assessment
, - expand sample size
- revise assessed risk
What is Monetary Unit Sampling? - correct answer ✔✔a technique that applies the theory of attributes
sampling to estimate the total dollar amount of the misstatement in a population
Monetary Unit Sampling - correct answer ✔✔- Emphasizes large numeric balances
- Relatively easy to use
- Provides a statistical conclusion
- Results in smaller sample sizes than classical variable sampling approaches
- Is used when there is a low expected misstatement risk in the population
Disadvantages:
• Small balances have a smaller chance of being examined
• Zero and negative balances are not selected
Monetary Unit Sampling Steps (6 Steps) - correct answer ✔✔1. Determine test objectives
2. Define Population Characteristics
3. Determine Sample Size
4. Make Sample Selection
5. Perform testing on Sample items
6. Calculate projected Misstatement and Upper limit Misstatements
MUS: what are the inputs when determining sample size (4 inputs) - correct answer ✔✔- Population
Book Value
- Desired confidence level (ARIA)
- Expected Misstatement
- Tolerable Misstatement
questions & answers
What is the relationship between sample size and sampling risk? - correct answer ✔✔inverse
relationship
- bigger sample size, lower risk
what is sampling risk? - correct answer ✔✔the possibility that the sample drawn is NOT representative
of the population
- auditor will reach incorrect conclusion about account balances based on the sample
what are the steps in the attribute sampling process (7 steps)? - correct answer ✔✔1. State the
objectives of the procedure/test
2. Define the population characteristic (sampling unit)
3. Determine the Sample Size (ARIA, TDR, EDR)
4. Select Sample
5. Perform Audit Procedures
6. Determine Sample Deviation and Upper Deviation Rate
7. Final Conclusions
How do you calculate Sample Deviation Rate? - correct answer ✔✔# of exceptions in the sample /
sample size
What happens if UDR < TDR in an attribute sample process? - correct answer ✔✔results SUPPORT
original assessment
- controls operate effectively
What happens if UDR > TDR in an attribute sample process? - correct answer ✔✔results DO NOT
SUPPORT original assessment
, - expand sample size
- revise assessed risk
What is Monetary Unit Sampling? - correct answer ✔✔a technique that applies the theory of attributes
sampling to estimate the total dollar amount of the misstatement in a population
Monetary Unit Sampling - correct answer ✔✔- Emphasizes large numeric balances
- Relatively easy to use
- Provides a statistical conclusion
- Results in smaller sample sizes than classical variable sampling approaches
- Is used when there is a low expected misstatement risk in the population
Disadvantages:
• Small balances have a smaller chance of being examined
• Zero and negative balances are not selected
Monetary Unit Sampling Steps (6 Steps) - correct answer ✔✔1. Determine test objectives
2. Define Population Characteristics
3. Determine Sample Size
4. Make Sample Selection
5. Perform testing on Sample items
6. Calculate projected Misstatement and Upper limit Misstatements
MUS: what are the inputs when determining sample size (4 inputs) - correct answer ✔✔- Population
Book Value
- Desired confidence level (ARIA)
- Expected Misstatement
- Tolerable Misstatement
