Sampling Drills

Question 1

The risk of incorrect acceptance relates to:

1. Tests of controls and affects audit effectiveness
2. Tests of controls and affects audit efficiency
3. Substantive tests and affects audit effectiveness
4. Substantive tests and affects audit efficiency

Answer 1

3 - SUBSTANTIVE / EFFECTIVENESS

The risk of incorrect acceptance happens during substantive tests because these tests check if account balances are correct. It means the auditor wrongly accepts a balance as correct when it’s actually misstated.

This risk affects audit effectiveness because the auditor fails to detect a material error, leading to an incorrect audit opinion.

Question 2

The risk of assessing control risk too low relates to:

1. Tests of controls and affects audit effectiveness
2. Tests of controls and affects audit efficiency
3. Substantive tests and affects audit effectiveness
4. Substantive tests and affects audit efficiency

Answer 2

1 - CONTROLS / EFFECTIVENESS

The risk of assessing control risk too low means the auditor wrongly believes controls are effective when they’re not. This happens during tests of controls.

It affects audit effectiveness because the auditor relies on faulty controls, does less substantive testing, and may fail to detect material misstatements, leading to an incorrect audit opinion.

Question 3

The risk of assessing control risk too high relates to:

1. Tests of controls and affects audit effectiveness
2. Tests of controls and affects audit efficiency
3. Substantive tests and affects audit effectiveness
4. Substantive tests and affects audit efficiency

Answer 3

2 - CONTROLS / EFFICIENCY

The risk of assessing control risk too high means the auditor incorrectly concludes controls are not effective when they actually are. This happens during tests of controls.

It affects audit efficiency because the auditor does more substantive testing than necessary, increasing time and cost without improving audit quality.

Question 4

The risk of incorrect rejection relates to

1. Tests of controls and affects audit effectiveness
2. Tests of controls and affects audit efficiency
3. Substantive tests and affects audit effectiveness
4. Substantive tests and affects audit efficiency

Answer 4

4 - SUBSTANTIVE / EFFICIENCY

The risk of incorrect rejection occurs during substantive tests when the auditor wrongly concludes an account balance is misstated when it is actually correct.

This risk affects audit efficiency because it leads to unnecessary additional testing and work, increasing time and cost without improving audit quality.

Question 5

An auditor tests a sample of controls and concludes they are effective, but if the entire population were tested, the controls would be found ineffective. Which sampling risk does this represent?

Answer 5

Risk of assessing control risk too low

Explanation:
The auditor’s sample incorrectly suggests controls are working, so less substantive testing is done. In reality, controls are not operating as expected, increasing the chance of missing material misstatements and issuing an incorrect opinion.

Question 6

An auditor tests a sample of controls and concludes they are not operating effectively, but if the entire population were tested, the controls would actually be effective. Which sampling risk does this represent?

Answer 6

Risk of assessing control risk too high

Explanation:
The auditor’s sample incorrectly suggests controls are failing, so the auditor performs more substantive testing than necessary. This leads to inefficiency but does not increase the risk of missing material misstatements.

Question 7

An auditor tests a sample of account balances and concludes the balance is misstated, but if the entire population were tested, the balance would be fairly stated. Which sampling risk does this represent?

Answer 7

Risk of incorrect rejection

Explanation:
The sample incorrectly indicates a material misstatement, causing the auditor to believe the balance is misstated when it is not. This leads to unnecessary additional audit work, making the audit inefficient.

Question 8

An auditor tests a sample of account balances and concludes the balance is fairly stated, but if the entire population were tested, the balance would be materially misstated. Which sampling risk does this represent?

Answer 8

Risk of incorrect acceptance

Explanation:
The sample incorrectly indicates the account balance is correct, causing the auditor to accept it when it is actually misstated. This leads to an ineffective audit because material misstatements may go undetected.

Question 9

An auditor samples transactions and concludes the account balance is misstated, but testing the entire population would show the balance is actually correct. Which sampling risk does this represent?

Answer 9

Risk of incorrect rejection

Explanation:
The sample incorrectly indicates a misstatement, causing the auditor to believe the balance is misstated when it is not. This leads to unnecessary additional audit work, reducing audit efficiency.

Question 10

An auditor tests a sample of controls and concludes the controls are not operating effectively, but if the entire population were tested, the controls would be found to be operating effectively. Which sampling risk does this represent?

Answer 10

Risk of assessing control risk too high

Explanation:
The auditor’s sample incorrectly indicates a higher deviation rate than actually exists, leading to an overestimation of control risk. This causes the auditor to perform more substantive testing than necessary, reducing audit efficiency but not affecting audit effectiveness.

Question 11

An auditor tests a sample of controls and concludes the controls are operating effectively, but if the entire population were tested, the controls would be found not to be operating effectively. Which sampling risk does this represent?

Answer 11

Risk of assessing control risk too low

Explanation:
The auditor’s sample incorrectly indicates controls are effective, leading to underestimating control risk. This causes less substantive testing than necessary, increasing the chance of undetected material misstatements and an ineffective audit.

Question 12

An auditor tests a sample of account balances and concludes the balance is fairly stated, but if the entire population were tested, the balance would be materially misstated by an amount exceeding the tolerable misstatement. Which sampling risk does this represent?

Answer 12

Risk of incorrect acceptance

Explanation:
The auditor’s sample incorrectly indicates the account balance is correct, causing the auditor to accept it when it is actually misstated. This leads to an ineffective audit because material misstatements may go undetected.

Question 13

An auditor tests a sample of controls and concludes the controls are operating effectively, but the actual deviation rate in the population exceeds the tolerable rate. Which sampling risk does this represent?

Answer 13

Risk of assessing control risk too low

Explanation:
The auditor’s sample understates the true deviation rate, leading to overreliance on controls. This causes less substantive testing than necessary, increasing the chance of undetected material misstatements and an ineffective audit.

Question 14

An auditor tests a sample of controls and concludes the controls are operating effectively, but the actual deviation rate in the population is higher than the tolerable rate. Which sampling risk does this represent?

Answer 14

Risk of assessing control risk too low

Explanation:
The auditor’s sample understates the true deviation rate, leading to an overestimation of control effectiveness. This causes the auditor to rely too much on controls and perform less substantive testing, increasing the risk of undetected material misstatements and an ineffective audit.

Question 15

An auditor tests a sample of account balances and concludes the balance is misstated, but if the entire population were tested, the balance would be fairly stated. Which sampling risk does this represent?

Answer 15

Risk of incorrect rejection

Explanation:
The auditor’s sample incorrectly indicates a misstatement, causing unnecessary additional audit work. This leads to inefficiency because the auditor performs more procedures than needed, even though the balance is actually correct.

Question 16

An auditor tests a sample of controls and concludes the controls are not operating effectively, but if the entire population were tested, the controls would be operating effectively. Which sampling risk does this represent?

Answer 16

Risk of assessing control risk too high

Explanation:
The auditor’s sample overstates the deviation rate, leading to an overestimation of control risk. This causes the auditor to perform more substantive testing than necessary, resulting in an inefficient audit but not affecting audit effectiveness.

Question 17

An auditor tests a sample of account balances and concludes the balance is fairly stated, but the actual population contains material misstatements exceeding the tolerable amount. Which sampling risk does this represent?

Answer 17

Risk of incorrect acceptance

Explanation:
The auditor’s sample incorrectly indicates the balance is correct, causing acceptance of a materially misstated balance. This leads to an ineffective audit because material misstatements may go undetected.

Question 18

An auditor tests a sample of controls and concludes the controls are operating effectively, but the actual deviation rate in the population exceeds the tolerable rate. Which sampling risk does this represent?

Answer 18

Risk of assessing control risk too low

Explanation:
The auditor’s sample understates the true deviation rate, leading to an overestimation of control effectiveness. This causes the auditor to rely too much on controls and perform less substantive testing, increasing the risk of undetected material misstatements and an ineffective audit.

Question 19

An auditor tests a sample of account balances and concludes the balance is misstated, but if the entire population were tested, the balance would be fairly stated. Which sampling risk does this represent?

Answer 19

Risk of incorrect rejection

Explanation:
The auditor’s sample incorrectly indicates a misstatement, causing unnecessary additional audit work. This leads to inefficiency because the auditor performs more procedures than needed, even though the balance is actually correct.

Question 20

An auditor tests a sample of controls and concludes the controls are not operating effectively, but if the entire population were tested, the controls would be operating effectively. Which sampling risk does this represent?

Answer 20

Risk of assessing control risk too high

Explanation:
The auditor’s sample overstates the deviation rate, leading to an overestimation of control risk. This causes the auditor to perform more substantive testing than necessary, resulting in an inefficient audit but not affecting audit effectiveness.

Question 21

Reduce both the tolerable misstatement and the expected misstatement. How is sample size affected?

1. Increase sample size
2. Decrease sample size
3. No affect on sample size
4. indeterminate affect on same size

Answer 21

Indeterminate effect on sample size

A reduction in tolerable misstatement causes an increase in sample size, whereas a reduction in expected misstatement causes a decrease in sample size. The overall effect on sample size is therefore indeterminate.

Question 22

Decrease the assessed risk of material misstatement. How is sample size affected?

1. Increase sample size
2. Decrease sample size
3. No affect on sample size
4. indeterminate affect on same size

Answer 22

Decrease in sample size

The assessed risk of material misstatement is directly related to sample size, so a decrease in the assessed level of risk results in a smaller sample size.

Question 23

Increase the population variability. How is sample size affected?

1. Increase sample size
2. Decrease sample size
3. No affect on sample size
4. indeterminate affect on same size

Answer 23

Increase in sample size

Population variability is directly related to sample size, so an increase in population variability causes sample size to increase.

Question 24

Change from blank confirmation forms to confirmations that state the balance. How is sample size affected?

1. Increase sample size
2. Decrease sample size
3. No affect on sample size
4. indeterminate affect on same size

Answer 24

No effect on sample size

Changing the form of accounts receivable confirmations has no effect on sample size.

Question 25

Increase the tolerable misstatement. How is sample size affected? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 25

Decrease in sample size Tolerable misstatement is inversely related to sample size, so an increase in tolerable misstatement results in a decrease in sample size.

Question 26

Decrease both the expected misstatement and the assessed risk of material misstatement. How is sample size affected? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 26

Decrease in sample size Since both the expected misstatement and the assessed risk of material misstatement vary directly with sample size, a decrease in these two parameters will result in a decrease in sample size.

Question 27

Increase the population to include another category of payables. How is sample size affected? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 27

No effect on sample size The number of items in the population has virtually no effect on sample size, unless the population is very small. (Note: On the CPA exam, if the question doesn't clearly indicate an unusually small population, assume population size has no effect on sample size.)

Question 28

Decrease the population variability. How is sample size affected? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 28

Decrease in sample size Population variability is directly related to sample size, so a decrease in population variability causes sample size to decrease.

Question 29

An auditor decreases the tolerable misstatement and increases the expected misstatement in the accounts receivable sampling plan. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 29

Increase in sample size Explanation: Decreasing tolerable misstatement means the auditor is willing to accept less error, so a larger sample is needed. Increasing expected misstatement means the auditor anticipates more errors, also requiring a larger sample to detect them.

Question 30

An auditor decreases the assessed risk of material misstatement in a variable sampling plan for accounts payable. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 30

Decrease in sample size Explanation: A lower assessed risk of material misstatement means the auditor is willing to accept more risk, so less evidence is needed, resulting in a smaller sample size.

Question 31

An auditor increases the population variability in a variable sampling plan for accounts receivable. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 31

Increase in sample size Explanation: Higher population variability means the amounts vary more widely, so the auditor needs a larger sample to achieve the same level of confidence and precision.

Question 31

An auditor increases the tolerable misstatement in an accounts payable variable sampling plan. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 31

Decrease in sample size Explanation: Increasing tolerable misstatement means the auditor is willing to accept more error, so fewer items need to be tested, resulting in a smaller sample size.

Question 32

An auditor changes from using blank confirmation forms to confirmation forms that state the balance in an accounts receivable sampling plan. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 32

No effect on sample size Explanation: The form of confirmation (blank vs. stated balance) does not impact the statistical sample size; it may affect the reliability of evidence but not the number of items sampled.

Question 33

An auditor increases the population size by including another category of payables in a variable sampling plan. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 33

No effect on sample size Explanation: Sample size in variable sampling is generally unaffected by population size unless the population is very small. Adding another category to a large population does not change the sample size.

Question 33

An auditor increases the expected misstatement and decreases the assessed risk of material misstatement in a variable sampling plan for accounts payable. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 33

Indeterminate effect on sample size Explanation: Increasing expected misstatement tends to increase sample size, while decreasing assessed risk of material misstatement tends to decrease sample size. Because these factors move sample size in opposite directions, the overall effect is indeterminate without more information.

Question 34

An auditor decreases the population variability in a variable sampling plan for accounts payable. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 34

Decrease in sample size Explanation: Lower population variability means the amounts are more consistent, so the auditor can achieve the same confidence with a smaller sample.

Question 34

An auditor decreases both the expected deviation rate and the tolerable deviation rate in an attribute sampling plan for testing controls. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 34

Indeterminate effect on sample size Explanation: Decreasing the expected deviation rate tends to decrease sample size, while decreasing the tolerable deviation rate tends to increase sample size. Because these effects move sample size in opposite directions, the overall effect is indeterminate without more information.

Question 35

An auditor decreases the allowable risk of assessing control risk too low in an attribute sampling plan for testing controls. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 35

Increase in sample size Explanation: Lowering the allowable risk of assessing control risk too low means the auditor wants to be more certain that controls are effective, so they increase the sample size to reduce the risk of over-reliance on controls.

Question 36

An auditor decreases the expected misstatement and the assessed risk of material misstatement in a variable sampling plan for accounts payable. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 36

Decrease in sample size Explanation: Both expected misstatement and assessed risk of material misstatement vary directly with sample size. Decreasing either reduces the sample size needed.

Question 37

An auditor decreases the tolerable deviation rate in an attribute sampling plan for testing controls. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 37

Increase in sample size Explanation: Lowering the tolerable deviation rate means the auditor is willing to accept fewer deviations (errors), so a larger sample is needed to achieve the desired level of assurance.

Question 38

An auditor increases the risk of assessing control risk too low in an attribute sampling plan for testing controls. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 38

Decrease in sample size Explanation: Increasing the risk of assessing control risk too low means the auditor is willing to accept more risk, so less evidence is needed, resulting in a smaller sample size.

Question 39

An auditor increases the risk of incorrect acceptance in a variable sampling plan for substantive testing. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 39

Decrease in sample size Explanation: Increasing the risk of incorrect acceptance means the auditor is willing to accept a higher chance of incorrectly concluding the population is free of material misstatement, so less evidence is needed, resulting in a smaller sample size.

Question 40

An auditor decreases the risk of incorrect acceptance in a variable sampling plan for substantive testing. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 40

Increase in sample size Explanation: Lowering the risk of incorrect acceptance means the auditor wants to be more confident that a materially misstated population will be detected, so a larger sample size is needed.

Question 41

An auditor decreases the assessed risk of material misstatement in a variable sampling plan for accounts receivable. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 41

Decrease in sample size Explanation: Lowering the assessed risk of material misstatement means the auditor perceives less risk of error, so less evidence is needed, resulting in a smaller sample size.

Question 42

An auditor increases the expected misstatement but decreases the tolerable misstatement in a variable sampling plan for accounts receivable. How will this affect the sample size? 1. Increase sample size 2. Decrease sample size 3. No affect on sample size 4. indeterminate affect on same size

Answer 42

Increase in sample size Explanation: Increasing expected misstatement increases sample size because more errors are anticipated. Decreasing tolerable misstatement also increases sample size because the auditor is willing to accept less error. Both changes increase sample size.