Multiple Choice Questions
The following items concern determining exception rates using random sampling from large populations using attributes sampling. Select the best response.
a. From a random sample of items listed from a client's inventory count, an auditor estimates with a 90% confidence level that the CUER is between 4% and 6%. The auditor's major concern is that there is one chance in ten that the true exception rate in the population is
(1) More than 6%.
(2) Less than 6%.
(3) More than 4%.
(4) Less than 4%.
b. The upper precision limit (CUER) in statistical sampling is
(1) The percentage of items in a sample that possess a particular attribute.
(2) The percentage of items in a population that possess a particular attribute.
(3) A statistical measure, at a specified confidence level, of the maximum rate of occurrence of an attribute.
(4) The maximum rate of exception that the auditor would be willing to accept in the population without altering the planned reliance on the attribute.
c. As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was
(1) Less than the risk of assessing control risk too low, based on the auditor's sample.
(2) Less than the deviation rate in the auditor's sample.
(3) More than the risk of assessing control risk too low, based on the auditor's sample.
(4) More than the deviation rate in the auditor's sample.
d. An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the
(1) Sample exception rate Plus the allowance for sampling risk equals the tolerable rate.
(2) Sample exception rate is less than the expected rate of exception used in planning the sample.
(3) Tolerable rate less the allowance for sampling risk exceeds the sample exception rate.
(4) Sample exception rate plus the allowance for sampling risk exceeds the tolerable rate.