When using statistical sampling for tests of controls, an auditor's evaluation would include a statistical conclusion about whether:Select one:a.Population characteristics occur at least once in the population.b.Monetary precision exceeds a predetermined amount.c.Deviations in the population are within an acceptable range.d.The population's total monetary value is not in error by more than a predetermined amount.
Question
When using statistical sampling for tests of controls, an auditor's evaluation would include a statistical conclusion about whether:Select one:a.Population characteristics occur at least once in the population.b.Monetary precision exceeds a predetermined amount.c.Deviations in the population are within an acceptable range.d.The population's total monetary value is not in error by more than a predetermined amount.
Solution
The correct answer is c. Deviations in the population are within an acceptable range.
Here's why:
Statistical sampling for tests of controls is a method used by auditors to evaluate the effectiveness of a company's internal controls. The auditor selects a sample of transactions and evaluates them for compliance with the company's established controls.
The purpose of this test is not to determine if a characteristic occurs at least once in the population (option a), or if the total monetary value of the population is not in error by more than a predetermined amount (option d). These are not relevant to the test of controls.
Option b, monetary precision exceeds a predetermined amount, is also not the goal of this test. The test of controls is not concerned with the precision of monetary amounts, but rather with whether the controls are being followed.
The goal of the test of controls is to determine whether the deviations (i.e., instances where the controls are not followed) are within an acceptable range (option c). If the number of deviations is within this range, the auditor can conclude that the controls are effective. If the number of deviations exceeds this range, the auditor may conclude that the
Similar Questions
In considering the characteristics of a population, for tests of controls, the auditor makes an assessment of the expected rate of deviation based on the auditor's understanding of the relevant controls or on the examination of a small number of items from the population.Select one:TrueFalse
Audit sampling is designed to enable conclusions to be drawn about an entire population on the basis of testing a sample drawn from it.Select one:TrueFalse
Audit sampling enables the auditor to obtain and evaluate audit evidence about some characteristic of the items selected in order to form or assist in forming a conclusion concerning the population from which the sample is drawn.Select one:TrueFalse
Which statement is incorrect about sampling risk?Select one:a.Risk of assessing control risk too low and risk of incorrect acceptance affects audit effectiveness as it would usually lead to additional work to establish that initial conclusions were incorrect.b.Sampling risk arises from the possibility that the auditor's conclusion, based on a sample may be different from the conclusion reached if the entire population were subjected to the same audit procedure.c.Risk of assessing control risk too high is the risk that the auditor will conclude, in the case of a test of control, that control risk is higher than it actually is.d.The mathematical complements of sampling risks are termed confidence levels.
Assessing control risk too high is the risk that the sample.Select one:a.Contains monetary misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or classes of transactions.b.Contains proportionately more deviations from prescribed control procedures than actually exist in the population as a whole.c.Does not support tolerable error for some or all of management's assertions.d.Contains proportionately fewer deviations from prescribed control procedures than actually exist in the population as a whole
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