G.32 Which of the following major stages of the audit is most closely related to variables sampling?

a. Determining preliminary levels of performance materiality.

b. Performing tests of controls procedures.

c. Performing substantive procedures.

d. Searching for the possible occurrence of subsequent events.

G.33 Which of the following types of variables sampling plans has a tendency to select higher-dollar items for examination?

a. Difference estimation.

b. Mean-per-unit estimation.

c. Monetary unit sampling.

d. Ratio estimation.

G.34 Variables sampling methods can be used to estimate

	Amount of Misstatement	True Account Balance
a.	Yes	Yes
b.	Yes	No
c.	No	Yes
d.	No	No

G.35 When the audit risk is 0.015, inherent risk is 0.50, control risk is 0.30 (i.e., RMM = 0.15), and analytical procedures risk is 0.50, the risk of incorrect acceptance is

a. 0.02

b. 0.20

c. 0.50

d. 2.00

G.36 When making a decision about the dollar amount in an account balance based on a sample, the audit team considers the risk of incorrect acceptance to be more serious than the risk of incorrect rejection because

a. The incorrect rejection decision impairs the efficiency of the audit.

b. The audit team will do additional work and discover the misstatement of the incorrect decision.

c. The incorrect acceptance decision impairs the effectiveness of the audit.

d. Sufficient appropriate audit evidence will not have been obtained.

G.37 The unique feature of monetary unit sampling is that

a. Sampling units are not chosen at random.

b. A dollar unit selected in a sample is not replaced before the sample selection is completed.

c. Auditors need not worry about the risk of incorrect acceptance decision.

d. The population is defined as the number of monetary units in an account balance or class of transactions.

G.38 When determining sample size under monetary unit sampling, an audit team does not need to make a judgment or estimate of

a. Audit risk.

b. Tolerable misstatement.

c. Expected misstatement.

d. Standard deviation.

G.39 Which of the following statements is correct about monetary unit sampling?

a. The risk of incorrect acceptance must be specified.

b. Smaller logical units have a higher probability of selection in the sample than larger units.

c. Each logical unit in the population has an equally likely chance of being selected in the sample.

d. The projected misstatement cannot be calculated when one or more misstatements are discovered.

G.40 One of the primary advantages of monetary unit sampling is the fact that

a. It is an effective method of sampling for evidence of understatement in asset accounts.

b. The sample selection automatically achieves high-dollar selection and stratification.

c. The sample selection provides for including a representative number of small-value components.

d. Expanding the sample for additional evidence is relatively simple.

G.41 Which of the following would not cause the audit team to select a larger sample of items under a monetary unit sampling application?

a. A reduction in the risk of incorrect acceptance from 10 percent to 5 percent.

b. An increase in the tolerable misstatement from $30,000 to $60,000.

c. An increase in the expected misstatement from $20,000 to $40,000.

d. All of these would result in selecting a larger sample.

G.42 Assume that an account with a recorded balance of $5,000 has an audited balance of $3,000.

Using MUS, if the sampling interval is $1,500, the projected misstatement would be

a. $600

b. $900

c. $2,000

d. $3,000

G.43 If the _____ is less than the ____ , the audit team would conclude that the account balance is fairly stated.

a. Projected misstatement; tolerable misstatement.

b. Tolerable misstatement; projected misstatement.

c. Upper limit on misstatements; tolerable misstatement.

d. Tolerable misstatement; upper limit on misstatements.

G.44 If the upper limit on misstatements is calculated at $17,800 and the tolerable misstatement is $15,000, what is the minimum amount of adjustment necessary for the audit team to issue an unqualified opinion on the client's financial statements?

a. $0

b. $2,800

c. $4,800

d. $14,800

G.45 Alice Rathermel audited LoHo Company's inventory using sampling. She examined 120 items from an inventory compilation list and discovered net overstatement of $480. The audited items had a book (recorded) value of $48,000. There were 1,200 inventory items listed, and the total recorded inventory amount was $490,000. What is the projected misstatement using mean-per-unit estimation?

a. $480

b. $576,000

c. $10,000

d. $480,000

G.46 To determine the sample size for a classical variables sampling application, an audit team should consider the tolerable misstatement, risk of incorrect acceptance, risk of incorrect rejection, population size, population variability, and

a. Expected misstatement in the account.

b. Overall materiality for the financial statements taken as a whole.

c. Risk of assessing control risk too low.

d. Risk of assessing control risk too high.

G.47 Which of the following components is not used in determining the upper limit on misstatements?

a. Basic allowance for sampling risk.

b. Incremental allowance for sampling risk.

c. Projected misstatement.

d. Tolerable misstatement.

G.48 The projected misstatement is determined by multiplying the sampling interval by the

a. Expansion factor.

b. Incremental confidence factor.

c. Confidence factor.

d. Tainting percentage.

G.49 Which of the following steps involved with determining the upper limit on misstatements is ordinarily performed earliest?

a. Multiply the sampling interval by the tainting percentage.

b. Determine the audited amount of the item and compare it to the recorded amount.

c. Calculate the basic allowance for sampling risk.

d. Calculate the incremental allowance for sampling risk.

G.50 A component of an account balance has a recorded balance of $10,000 and an audited balance of $8,000. Using MUS, if the sampling interval is $20,000, the projected misstatement would be

a. $2,000

b. $4,000

c. $5,000

d. $10,000

G.51 Which of the following statements is not true with respect to the calculation of the upper limit on misstatements?

a. The tainting percentage is determined based on the difference between the recorded balance and the audited balance.

b. A separate incremental allowance for sampling risk is calculated for each misstatement discovered by the auditor.

c. If no misstatements are detected, the basic allowance for sampling risk equals zero.

d. The projected misstatement is determined by multiplying the sampling interval by the tainting percentage.

G .52 Which of the following courses of action would an audit team most likely follow in planning a sample of cash disbursements if the audit team is aware of several unusually large cash disbursements?

a. Increase the sample size to reduce the effect of the unusually large disbursements.

b. Continue to draw new samples until all unusually large disbursements appear in the sample.

c. Set the tolerable deviation rate at a lower level than originally planned.

d. Stratify the cash disbursements population so that the unusually large disbursements are selected.