Module G MC Q&A
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. Test of details risk
The sampling method used to examine a population when the auditor wants to estimate
a continuous amount (or value) of the population is:
A. Attribute sampling
B. Balance sampling
C. Discovery sampling
D. Variables sampling - (correct answer)D. Variables sampling
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 the above would be estimated using variables sampling - (correct answer)B.
The extent to which an internal control procedure is not functioning as intended
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 error 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. Stratify the cash disbursements population so that the
unusually large disbursements are selected
The total amount of actual monetary misstatement found in a sample is referred to as
the:
A. Projected misstatement
B. Tolerable error
C. Actual misstatement
D. Incremental allowance for sampling risk - (correct answer)C. Actual misstatement
Which of the following is not an advantage associated with dollar unit sampling (DUS)?
A. DUS sampling methods typically include transactions or components reflecting
relatively large dollar amounts
B. DUS sampling methods are more effective in identifying overstatement errors
C. DUS sampling methods provide a conservative (higher) estimate of misstatement in
the account balance or class of transactions
D. DUS sampling methods typically result in relatively small sample sizes - (correct
answer)C. DUS sampling methods provide a conservative (higher) estimate of
misstatement in the account balance or class of transactions
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 error
C. Recorded value
D. Tolerable error - (correct answer)A. Audited value
The auditor's sample would indicate that the client's account balance is fairly stated
when the _____ is less than the _____.
,A. Upper error limit; tolerable error
B. Actual misstatement; tolerable error
C. Tolerable error; upper error limit
D. Tolerable error; actual misstatement - (correct answer)A. Upper error limit; tolerable
error
How does dollar unit sampling (DUS) ensure that larger dollar components are selected
for examination?
A. DUS sampling requires the auditor to identify all items having a balance greater than
materiality prior to beginning the sample selection process
B. DUS sampling requires the auditor to stratify the sample into larger and smaller dollar
components prior to beginning the sample selection process
C. DUS sampling defines the sampling unit as an individual dollar within an account
balance or class of transactions
D. DUS sampling selects components having larger balances in the prior audit - (correct
answer)C. DUS sampling defines the sampling unit as an individual dollar within an
account balance or class of transactions
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 unqualified opinion on the client's financial statements - (correct answer)D.
The risk of incorrect acceptance may ultimately result in the auditor incorrectly issuing
an unqualified opinion on the client's financial statements
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
C. This risk occurs when the sample results suggest that the account balance is fairly
stated
D. This risk is controlled by the auditor in determining sample size under dollar unit
sampling (DUS) - (correct answer)D. This risk is controlled by the auditor in determining
sample size under dollar unit sampling (DUS)
Which of the following would not result in a lower level of the risk of incorrect
acceptance?
A. An increase in the acceptable level of audit risk from 5% to 10%
B. The inability of the auditor to rely on the internal control as planned
C. An increase in the susceptibility of the account balance to misstatement
D. A reduction in the utilization of analytical procedures in the audit examination -
(correct answer)A. An increase in the acceptable level of audit risk from 5% to 10%
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.MUS sampling methods provide a conservative (higher) estimate of
misstatement in the account balance or class of transactions.
How does monetary unit sampling (MUS) ensure that larger dollar components are
selected for
examination?
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. Test of details risk
The sampling method used to examine a population when the auditor wants to estimate
a continuous amount (or value) of the population is:
A. Attribute sampling
B. Balance sampling
C. Discovery sampling
D. Variables sampling - (correct answer)D. Variables sampling
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 the above would be estimated using variables sampling - (correct answer)B.
The extent to which an internal control procedure is not functioning as intended
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 error 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. Stratify the cash disbursements population so that the
unusually large disbursements are selected
The total amount of actual monetary misstatement found in a sample is referred to as
the:
A. Projected misstatement
B. Tolerable error
C. Actual misstatement
D. Incremental allowance for sampling risk - (correct answer)C. Actual misstatement
Which of the following is not an advantage associated with dollar unit sampling (DUS)?
A. DUS sampling methods typically include transactions or components reflecting
relatively large dollar amounts
B. DUS sampling methods are more effective in identifying overstatement errors
C. DUS sampling methods provide a conservative (higher) estimate of misstatement in
the account balance or class of transactions
D. DUS sampling methods typically result in relatively small sample sizes - (correct
answer)C. DUS sampling methods provide a conservative (higher) estimate of
misstatement in the account balance or class of transactions
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 error
C. Recorded value
D. Tolerable error - (correct answer)A. Audited value
The auditor's sample would indicate that the client's account balance is fairly stated
when the _____ is less than the _____.
,A. Upper error limit; tolerable error
B. Actual misstatement; tolerable error
C. Tolerable error; upper error limit
D. Tolerable error; actual misstatement - (correct answer)A. Upper error limit; tolerable
error
How does dollar unit sampling (DUS) ensure that larger dollar components are selected
for examination?
A. DUS sampling requires the auditor to identify all items having a balance greater than
materiality prior to beginning the sample selection process
B. DUS sampling requires the auditor to stratify the sample into larger and smaller dollar
components prior to beginning the sample selection process
C. DUS sampling defines the sampling unit as an individual dollar within an account
balance or class of transactions
D. DUS sampling selects components having larger balances in the prior audit - (correct
answer)C. DUS sampling defines the sampling unit as an individual dollar within an
account balance or class of transactions
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 unqualified opinion on the client's financial statements - (correct answer)D.
The risk of incorrect acceptance may ultimately result in the auditor incorrectly issuing
an unqualified opinion on the client's financial statements
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
C. This risk occurs when the sample results suggest that the account balance is fairly
stated
D. This risk is controlled by the auditor in determining sample size under dollar unit
sampling (DUS) - (correct answer)D. This risk is controlled by the auditor in determining
sample size under dollar unit sampling (DUS)
Which of the following would not result in a lower level of the risk of incorrect
acceptance?
A. An increase in the acceptable level of audit risk from 5% to 10%
B. The inability of the auditor to rely on the internal control as planned
C. An increase in the susceptibility of the account balance to misstatement
D. A reduction in the utilization of analytical procedures in the audit examination -
(correct answer)A. An increase in the acceptable level of audit risk from 5% to 10%
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.MUS sampling methods provide a conservative (higher) estimate of
misstatement in the account balance or class of transactions.
How does monetary unit sampling (MUS) ensure that larger dollar components are
selected for
examination?
