CHAPTER 9

1. What does PSA 530 define as audit sampling?​

A. Use of analytics to test assertions​
B. Selecting only significant items​
C. Applying audit procedures to less than 100% of items​
D. Performing 100% examination of account balances

2. Audit sampling is based on the assumption that the sample is:​

A. Small but important​
B. Easily accessible​
C. Representative of the population​
D. Randomly replaced

3. Which of the following is NOT a sampling risk?​

A. Risk of incorrect acceptance​
B. Risk of under-reliance​
C. Risk of accounting error​
D. Risk of over-reliance

4. What is a situational example of sampling in an audit?​

A. Auditor checks every invoice manually​
B. Auditor examines all cash transactions​
C. Auditor reviews a subset of inventory items for valuation​
D. Auditor watches an employee work

5. Sampling risk is controlled by:​

A. Changing procedures​
B. Increasing sample size and proper selection methods​
C. Decreasing tolerable misstatement only​
D. Avoiding statistical tests

6. Alpha risk in test of controls means:​

A. Concluding control is ineffective when it actually is effective​
B. Concluding control is effective when it is not​
C. Control is properly tested​
D. Test of balances is skipped

7. What is Beta risk in substantive testing?​

A. Rejecting true population​
B. Concluding no misstatement exists when there actually is one​
C. Overstating the sample size​
D. Misinterpreting documents

8. Which of the following is a non-sampling risk?​

A. Inaccurate sample size​
B. Misinterpreting audit evidence​
C. Incorrect rejection​
D. Over-reliance

9. Which of the following approaches allows measurement of sampling risk?​

A. Judgmental selection​
B. Analytical procedures​
C. Statistical sampling​
D. Observational sampling

10. Non-statistical sampling uses:​

A. Auditor’s judgment​
B. Standard formulas​
C. Computer software only​
D. Population tables
11. Which of the following is used to test frequency of control deviations?​
A. Variable sampling​
B. Attribute sampling​
C. Ratio estimation​
D. Control variance method

12. A situational example of attribute sampling is:​

A. Testing how often a purchase order lacks authorization​
B. Calculating total inventory value​
C. Measuring misstatements​
D. Determining stock variance

13. Variable sampling is mostly used in:​

A. Risk assessment​
B. Substantive testing for monetary amounts​
C. Attribute analysis​
D. Observing internal controls

14. A pilot sample is used to determine:​

A. Monetary values​
B. Auditor reliance​
C. Expected deviation rate​
D. Final sample report

15. Which selection method ensures equal chance for each item?​
A. Random number selection​
B. Haphazard sampling​
C. Stratified sampling​
D. Sequential testing

16. A common sample selection in practice due to simplicity is:​

A. Random selection​
B. Systematic selection​
C. Ratio estimation​
D. Discovery sampling

17. What is the first step in audit sampling?​

A. Evaluate results​
B. Send confirmation​
C. Define objective of the test​
D. Select sample

18. In test of controls, a tolerable deviation rate is:​

A. Unimportant measure​
B. A fixed 10% for all tests​
C. Maximum deviation rate auditor is willing to accept​
D. Derived from audit risk

19. Which is inversely related to sample size?​

A. Expected deviation rate​
B. Population variation​
C. Acceptable sampling risk​
D. Audit materiality

20. A higher expected deviation rate leads to:​

A. Lower testing​
B. Larger sample size​
C. Control test waiver​
D. Reduced audit procedures
21. In which situation will you exclude a sample item from evaluation?​
A. When it shows error​
B. When document is missing​
C. When document is voided properly​
D. When deviations are detected

22. A missing document in a sample is treated as:​

A. Non-deviation​
B. Deviation​
C. Ignored item​
D. Replacement item

23. Sample deviation rate is computed by:​

A. Sample size/population size​
B. Number of deviations/sample size​
C. Audit risk/sample size​
D. Number of errors/total customers

24. A deviation rate of 3% in a sample of 300 means how many deviations?​

A. 6​
B. 9​
C. 12​
D. 3

25. If sample deviation rate exceeds tolerable rate, auditor should:​

A. Increase reliance on control​
B. Increase substantive testing​
C. Decrease control risk​
D. Reduce audit documentation

26. What is “allowance for sampling risk”?​

A. Reserve for audit cost​
B. Possibility that actual deviation rate is higher than sample rate​
C. Auditor’s margin of error​
D. Sample limitation notice

27. If sample deviation rate is close to tolerable rate, what should the auditor do?​
A. Conclude internal control is effective​
B. Consider allowance for sampling risk carefully​
C. Skip further procedures​
D. Ignore deviation

28. Statistical sampling helps an auditor:​

A. Increase revenue​
B. Design efficient sample and evaluate results objectively​
C. Avoid testing procedures​
D. Minimize client fees

29. A sample selected based purely on auditor’s intuition is called:​

A. Random selection​
B. Stratified sampling​
C. Haphazard selection​
D. Analytical estimation

30. In systematic selection, sampling interval is calculated by:​

A. Sample size × Population size​
B. Population size ÷ Sample size​
C. Deviation rate ÷ Error count​
D. Risk level ÷ Sample deviation
31. A situational example of stratified sampling is:​
A. Selecting invoices at random​
B. Grouping customer accounts by balance before selecting samples​
C. Ignoring outliers​
D. Grouping staff by department

32. Discovery sampling is most appropriate when:​

A. Errors are numerous​
B. No deviations are expected, but one is critical​
C. Analytical procedures are used​
D. Controls are always effective

33. In sequential sampling, auditor:​

A. Uses only ratio estimation​
B. Decides whether to continue sampling based on initial results​
C. Uses 100% examination​
D. Stops after selecting 10 items

34. A value-weighted sample gives higher chance of selection to:​

A. Randomly chosen items​
B. Smaller value items​
C. Higher monetary value items​
D. New transactions only

35. A sample unit in value-weighted sampling is equivalent to:​

A. Document number​
B. Peso value​
C. Client account​
D. Invoice date

36. When is stratified sampling most useful?​

A. To test policies​
B. When population has high variability​
C. To reduce deviations​
D. For non-financial assertions

37. Substantive testing evaluates:​

A. Internal controls​
B. Financial statement amounts​
C. Employee performance​
D. Business processes

38. Acceptable sampling risk in substantive test is linked to:​

A. Audit timing​
B. Inherent risk​
C. Detection risk​
D. Test of controls

39. Tolerable misstatement is defined as:​

A. Standard misstatement for all audits​
B. Maximum amount of error auditor will tolerate without modifying opinion​
C. Amount allowed by law​
D. Calculated deviation rate

40. A situational example of tolerable misstatement:​

A. 2% control deviation​
B. Allowing up to P500,000 misstatement in P10 million receivables​
C. Allowing two errors in cash count​
D. Performing substantive test late
41. Population variation affects:​
A. Tolerable misstatement​
B. Sample size​
C. Deviation rate​
D. Audit strategy

42. Higher population variation leads to:​

A. No effect on sampling​
B. Larger sample size​
C. Reduced testing​
D. Reduced sampling risk

43. When projecting misstatements, ratio estimation uses:​

A. Book values of sample and population​
B. Number of customers​
C. Detection rate​
D. Standard deviations only

44. Difference estimation is based on:​

A. Sampling interval​
B. Number of items tested vs population count​
C. Ratio analysis​
D. Invoice variance

45. Projected misstatement is calculated as:​

A. Sample size ÷ total deviation​
B. (Sample misstatement × population size) ÷ sample size​
C. Deviation rate × tolerable rate​
D. Misstatement ÷ deviation

46. If projected misstatement exceeds tolerable misstatement:​

A. Auditor reduces sample size​
B. Auditor concludes account is materially misstated​
C. Auditor increases tolerable rate​
D. Auditor ignores control risk

47. Which is an appropriate auditor response to high projected misstatement?​

A. Request adjustment or perform further procedures​
B. Accept results without concern​
C. Skip other tests​
D. Ignore errors

48. What are anomalous errors?​

A. Systematic errors​
B. Errors from isolated, non-representative events​
C. Documented fraud​
D. Consistent overstatements

49. If anomalous errors are found, auditor should:​

A. Exclude and ignore completely​
B. Exclude from projection but assess impact separately​
C. Add to total misstatements​
D. Report to tax authorities

50. In evaluating results, the final decision is based on:​

A. Auditor’s mood​
B. Number of documents​
C. Comparison of projected misstatements and tolerable misstatements​
D. Audit fee budget