AC591
Week 5 online quiz
1.
Question:
An auditor uses an attribute sampling plan to determine whether large expenditures are being
properly approved. The auditor is willing to accept a 2% risk of assessing control risk too low,
and has a tolerable rate of 5%. A sample of 100 invoices is selected, and only one is found to be
lacking appropriate approval. One invoice selected by the auditor cannot be located. Which
statement is
true
?
Your Answer:
Since the sample deviation rate is less than the tolerable rate, the
auditor should rely on this control.
INCORREC
T
There is not enough information given to determine whether the
auditor should rely on this control.
CORRECT
ANSWER
Since the auditor has a tolerable rate of 5%, he or she can be 95%
certain that he or she will make a correct decision.
The invoice selected by the auditor that cannot be located is ignored in
the calculation of the sample deviation rate.
Instructor Explanation:
Choice "b" is correct. The missing invoice should be counted as a deviation, resulting in a 2%
sample deviation rate. However, this information alone is not sufficient to determine whether the
control can be relied upon. The auditor would also need to know the upper deviation rate (or the
allowance for sampling risk, which would allow the auditor to calculate the upper deviation rate).
It is the upper deviation rate that needs to be compared to the tolerable rate in making decisions.
Choice "a" is incorrect. It is the upper deviation rate (and not the sample deviation rate) that
needs to be compared to the tolerable rate in making decisions.
Choice "c" is incorrect. Since the auditor is willing to accept a 2% risk of assessing control risk
too low, this implies that there is a 98% chance that he or she will make a correct decision.
Choice "d" is incorrect. Sample items selected by the auditor, which cannot be located, are
generally considered deviations.
Points Received:
0 of 10
Comments:
2.
Question:
Stratified sampling would best be used in a situation where:
Your Answer:
There is a lot of variation among items in the
population.
CORRE
CT
The population has an abnormally small standard
deviation.
The population consists of very few items.
The population is unusually homogeneous.
Instructor Explanation:
Choice "a" is correct. When there is a lot of variability within the population, stratification, or
separating the population into relatively homogeneous groups, generally results in a reduced
sample size and therefore increases efficiency.
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Choice "b" is incorrect. A small standard deviation means there is little variability within the
population, making it less likely that stratification would be used.
Choice "c" is incorrect. If the population consists of very few items, the auditor will be likely to
test each item rather than breaking the population into homogeneous groups.
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 Spring '11
 Browman
 Financial audit

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