If an auditor used nonstatistical sampling instead of statistical sampling to estimate the value of
inventory, which of the following would be true?

A.

The confidence level could not be quantified.

B.

The precision would be larger.

C.

The projected value of inventory would be less reliable.

D.

The risk of incorrect acceptance would be higher.

In a sampling application, the group of items about which the auditor wants to estimate some
characteristic is called the.

A.

Population.

B.

Attribute of interest.

C.

Sample.

D.

Sampling unit.

An internal auditor would most likely use attributes sampling when testing which of the following?

A.

Accounts receivable balances.

B.

Correct coding of accounts payable disbursement vouchers.

C.

Year-end inventory value.

D.

Fixed asset book value.

An audit department has received anonymous information that an employee has allegedly been
able to steal and cash checks sent to the organization by customers. What is the most efficient
way for an auditor to determine how this type of fraud could occur and who might be the
perpetrator?

A.

Confirm accounts receivable.

B.

Confirm accounts payable.

C.

Review the endorsements and banks of deposit on customers' canceled checks.

D.

Flowchart and analyze key controls in the cash receipts process.

If an auditor expects to find numerous discrepancies between recorded values and audited values
of sample selections, which sampling technique would be most appropriate?

A.

Attributes sampling.

B.

Probability-proportional-to-size sampling.

C.

Difference estimation sampling.

D.

Discovery sampling

During an audit of a retail organization, an internal auditor found a scheme in which the warehouse
director and the purchasing agent diverted approximately $500,000 of goods to their own
warehouse, then sold the goods to third parties. The fraud was not found earlier since the
warehouse director updated the perpetual inventory records and then forwarded receiving reports
to the accounts payable department for processing. Which of the following procedures would have
most likely led to the discovery of the missing materials and the fraud?

A.

Select a random sample of receiving reports and trace to the recording in the perpetual
inventory records. Note differences and investigate by type of product.

B.

Select a random sample of purchase orders and trace to receiving reports and to the records in
the accounts payable department.

C.

Take an annual physical inventory, reconciling amounts with the perpetual inventory records.
Note the pattern of differences and investigate.

D.

Select a random sample of sales invoices and trace to the perpetual inventory records to see if
inventory was on hand. Investigate any differences.

Which of the following factors would increase the confidence level in a variables sampling plan?
I. A larger sample size.
II. A stratified sample.
III. A larger standard deviation.

A.

I and II only

B.

I and III only

C.

 II and III only

D.

I, II, and III

If an auditor is sampling to test compliance with a particular company policy, which of the following
factors should not affect the allowable level of sampling risk?

A.

The experience and knowledge of the auditor.

B.

The adverse consequences of noncompliance.

C.

The acceptable level of risk of making an incorrect audit conclusion.

Which of the following describes an internal auditor's responsibilities to include audit procedures to
detect fraud in audits of a multinational organization?

A.

International Accounting Standards require the internal auditor to include audit procedures
which would detect fraud if it would cause a material misrepresentation of the financial statements.

B.

 Internal auditors do not have any specific responsibilities with respect to including fraud-related
audit procedures.

C.

Proper audit procedures, when carried out with due professional care, will guarantee that fraud,
if present, will be detected.

D.

 If significant control weaknesses are detected, additional tests should be directed toward other
indicators of fraud.

An appliance repair company is considering relocating the center that houses its service vehicles.
An internal auditor wants to determine the potential reduction in average miles driven by the
service vehicles if the center is relocated. Which of the following statistical sampling methods
would be most appropriate for this test?

A.

Attributes sampling.

B.

Discovery sampling.

C.

Probability-proportional-to-size sampling.

D.

Mean-per-unit sampling.

Monetary-unit sampling is most useful when the internal auditor:

A.

Is testing the accounts payable balance.

B.

Cannot cumulatively arrange the population items.

C.

Expects to find several material errors in the sample.

D.

Is concerned with overstatements.

If management expects 100 percent compliance with a procedure, which of the following sampling
approaches would be most appropriate?

A.

Attributes sampling.

B.

Discovery sampling.

C.

Targeted sampling.

D.

Variables sampling.