Audit Mcqs - Cpar
Audit Mcqs - Cpar
Manila
AUDITING THEORY
d. The auditor is responsible only to his unqualified opinion but not for any other type of
opinion.
6. Which of the following is responsible for an entitys financial statements?
a. The entitys management
b. The entitys internal auditors
c. The entitys audit committee
d. The entitys board of directors
7. Which of the following is responsible for the fairness of representations made in financial
statements?
a. The independent auditor.
b. The internal auditor.
c. The client's management.
d. The audit committee.
8. To make the internal audit department independent, he should report directly to the
a. Board of Directors.
b. Audit committee.
c. Stockholders.
d. Controller.
9. Which of the following best describes why an independent auditor reports on financial
statements?
a. Independent auditors are likely to detect fraud
b. Competing interests may exist between management and the users of the statements
c. Misstated account balances are generally corrected by an independent audit.
d. Ineffective internal controls may exist.
10. Which of the following is an appraisal activity established within an entity as a service to the
entity?
a. External auditing
b. Internal auditing
c. Financial auditing
d. Compliance auditing
11. Because an external auditor is paid a fee by a client company, he or she
a. Is absolutely independent and may conduct an audit
b. May be sufficiently independent to conduct an audit
c. Is never considered to be independent
d. Must receive approval of the Securities and Exchange Commission before conducting an audit
12. Which statement is incorrect regarding the external auditors consideration of the work of
internal auditing?
a. The external auditor should consider the activities of internal auditing and their effect, if any,
on external audit procedures.
b. The external auditor should obtain a sufficient understanding of internal audit activities to
assist in planning the audit and developing an effective audit approach.
c. During the course of planning the audit, the external auditor should perform a preliminary
assessment of the internal audit function when it appears that internal auditing is relevant to the
external audit of the financial statements in specific audit areas.
d. When the external auditor intends to use specific work of internal auditing, the external auditor
need not evaluate and test that work to confirm its adequacy for the external auditor's purposes.
13. Which of the following is an incorrect phrase?
a. Auditing is a systematic process.
b. Auditing subjectively obtains and evaluates evidence.
c. Auditing evaluates evidence regarding assertions.
d. Auditing communicates results to interested users.
14. A study, appraisal, or review by the BOA or its duly authorized representatives, of the quality
of audit of financial statements through a review of the quality control measures instituted by an
Individual CPA, Firm or Partnership of CPAs engaged in the practice of public accountancy.
a. Peer review
b. Quality review
c. Analytical review
d. Administrative review
15. There is a need for assurance that all services obtained from a professional accountant are
carried out to the highest standards of performance. This statement relates to
a. Credibility
b. Professionalism
c. Quality of Services
d. Confidence
16. A partner or employee of the firm serving as an officer or as a director on the board of an
assurance client will most likely create
a. Intimidation threat
b. Self-review threat
c. Advocacy threat
d. Familiarity threat
17. Which of the following least likely create a self-review threat?
a. A former officer, director or employee of the assurance client serve as a member of the
assurance team.
b. A director, an officer or an employee of the assurance client in a position to exert direct and
significant influence over the subject matter of the assurance engagement has been a member of
the assurance team or partner of the firm.
c. Assisting an audit client in matters such as preparing accounting records or financial
statements.
d. A firm, or network firm, provides internal audit services to an audit client.
Chapter 2: FRAUD
1. When planning and performing audit procedures and evaluating and reporting the results
thereof, the auditor should
a. Search for errors that would have a material effect and for fraud that would have either
material or immaterial effect on the financial statements.
b. Consider the risk of misstatements in the financial statements resulting from fraud or error.
c. Search for fraud that would have a material effect and for errors that would have either
material or immaterial effect on the financial statements.
d. Consider the risk of material misstatements in the financial statements resulting from fraud or
error.
2. The term fraud refers to an intentional act by one or more individuals among management,
those charged with governance, employees, or third parties, involving the use of deception to
obtain an unjust or illegal advantage. Which statement is correct regarding fraud?
a. Auditors make legal determinations of whether fraud has actually occurred.
b. Misstatement of the financial statements may not be the objective of some frauds.
c. Fraud involving one or more members of management or those charged with governance is
referred to as employee fraud.
d. Fraud involving only employees of the entity is referred to as management fraud.
3. Which of the following illustrates a perceived opportunity to commit fraud?
a. Individuals are living beyond their means.
b. Management is under pressure, from sources outside or inside the entity, to achieve an
expected (and perhaps unrealistic) earnings target.
c. An individual believes internal control could be circumvented because the individual is in a
position of trust or has knowledge of specific weaknesses in the internal control system.
d. All of the above.
4. Auditing standards require that auditors be aware of relevant factors relating to fraudulent
reporting. Which of the following statements is false concerning fraudulent reporting?
a. Fraud frequently involves a pressure or an incentive to commit fraud and a perceived
opportunity to do so.
b. Two types of fraud relevant to the auditor include material misstatements arising from
fraudulent financial reporting and material misstatements arising from misappropriation of
assets.
c. Fraud involves actions of management but excludes the actions of employees or third parties.
d. An audit rarely involves the authentication of documentation; thus, fraud may go undetected
by the auditor.
b. Whether management has any knowledge of fraud that has been perpetrated on or within the
entity.
c. Managements attitudes toward its employees.
d. Auditors are not required to make inquiries of management relating to fraud.
10. The subsequent discovery of a material misstatement of the
from fraud or error, in and of itself, indicates:
a
a failure to obtain reasonable assurance
Yes
inadequate planning, performance or judgment
Yes
the absence of professional competence and due care
Yes
a failure to comply with PSAs
Yes
c
Yes
No
No
No
d
No
No
No
No
11. In general, material fraud perpetrated by which of the following are most difficult to detect?
a. Cashier.
b. Keypunch operator.
c. Internal auditor.
d. Controller.
12. The regular examination of financial statements is not primarily designed to disclose fraud
and other irregularities although their discovery may result. Normal audit procedures are more
likely to detect a fraud arising from
a. Forgeries on company checks.
b. Failure to record cash receipts for services rendered.
c. Theft of inventories.
d. Collusion on the part of several employees.
13. The following are examples of error, except
a. A mistake in gathering or processing data from which financial statements are prepared.
b. An incorrect accounting estimate arising from oversight or misinterpretation of facts.
c. A mistake in the application of accounting principles relating to measurement, recognition,
classification, presentation, or disclosure.
d. Misrepresentation in the financial statements of events, transactions or other significant
information.
14. Which of the following characteristics most likely would heighten an auditors concern about
the risk of intentional manipulation of financial statements?
a. Turnover of senior accounting personnel is low.
b. Insiders recently purchased additional shares of the entitys stock.
c. Management places substantial emphasis on meeting earnings projection.
d. The rate of change in the entitys industry is slow.
15. Which of the following circumstances most likely would cause an auditor to consider
whether material misstatements exist in an entitys financial statements?
a. Management places little emphasis on meeting earnings projections.
b. The board of directors makes all major financing decisions.
c. When assessing control risk, an auditor should not consider evidence obtained in prior audits
about the operation of controls.
d. Assessing control risk and obtaining an understanding of an entitys internal control may be
performed concurrently.
13. Based on a consideration of internal control completed at an interim date, the auditor
assessed control risk at a low level and performed interim substantive tests. The records and
procedures would most likely be tested again at year-end if
a. Tests of controls were not performed by the internal auditor during the remaining period.
b. Internal control provides a basis for limiting the extent of substantive testing.
c. The auditor used non-statistical sampling during the interim period testing of controls.
d. Inquiries and observations lead the auditor to believe that conditions have changed.
14. Although substantive tests may support the accuracy of underlying records, these tests
frequently provide no affirmative evidence of segregation of duties because
a. Substantive tests rarely guarantee the accuracy of the records if only a person who performs
incompatible functions.
b. The records may be accurate even though they are maintained by a person who performs
incompatible functions.
c. Substantive tests relate to the entire period under audit, but tests of controls ordinarily are
confined to the period during which the auditor is on the clients premises.
d. Many computerized procedures leave no audit trail of who performed them, so substantive
tests may necessarily be limited to inquiries and observation of office personnel.
15. After obtaining an understanding of internal control and assessing control risk, an auditor
decided not to perform additional tests of controls. The auditor most likely concluded that the
a. Additional evidence to support a further reduction in control risk was not cost-beneficial to
obtain.
b. Assessed level of inherent risk exceeded the assessed level of control risk.
c. Internal control was properly designed and justifiably may be relied on.
d. Evidence obtainable through tests of controls would not support an increased assessment of
control risk.
16. The objective of tests of details of transactions performed as tests of controls is to
a. Monitor the design and use of entity documents such as pre-numbered shipping form
b. Determine whether controls have been placed in operation.
c. Detect material misstatements in the account balances of the financial statements.
d. Evaluate whether controls operated effectively.
17. An auditor wishes to perform tests of controls on a clients cash disbursements procedures. If
the controls leave no audit trail of documentary evidence, the auditor most likely will test the
procedures by
a. Confirmation and observation.
b. Observation and inquiry.
c. Analytical procedures and confirmation.
d. Inquiry and analytical procedures.
18. Which of the following types of evidence would an auditor most likely examine to determine
whether controls are operating as designed?
a. Confirmations of receivables verifying account balances.
b. Letters of representations corroborating inventory pricing.
c. Attorneys responses to the auditors inquiries.
d. Client records documenting the use of computer programs.
19. Which of the following procedures concerning accounts receivable is an auditor most likely
to perform to obtain evidential matter in support of an assessed level of control risk below the
maximum level?
a. Sending confirmation requests to an entitys principal customers to verify the existence of
accounts receivable.
b. Inspecting an entitys analysis of accounts receivable for unusual balances.
c. Comparing an entitys uncollectible accounts expense to actual uncollectible accounts
receivable.
d. Observing an entitys employee prepare the schedule of past due accounts receivable.
20. Which of the following audit techniques most likely would provide an auditor with the most
assurance about the effectiveness of the operation on an internal control procedure?
a. Confirmation with outside parties
b. Observation of client personnel
c. Re--computation of account balance
d. Inquiry of client personnel
3. Mead Corp. orally engaged Dex & Co., CPAs, to audit its financial statements. The
management of Mead informed Dex that it suspected that the accounts receivable were
materially overstated. Although the financial statements audited by Dex did, in fact,
include a materially overstated accounts receivable balance, Dex issued an unqualified
opinion. Mead relied on the financial statements in deciding to obtain a loan from City
Bank to expand its operations. City relied on the financial statements in making the loan
to Mead. As a result of the overstated accounts receivable balance, Mead has defaulted on
the loan and has incurred a substantial loss. If Mead sues Dex for negligence in failing to
discover the overstatement, Dex's best defense would be that
a. No engagement letter had been signed by Dex.
b. The audit was performed by Dex in accordance with generally accepted auditing
standards.
c. Dex was not in privity of contract with Mead.
d. Dex did not perform the audit recklessly or with an intent to deceive.
4. As a consequence of failure to adhere to generally accepted auditing standards in the
course of an audit of the Lamp Corp., Harrison, CPA, did not detect the embezzlement of
a material amount of funds by the company's controller. As a matter of common law, to
what extent would Harrison be liable to the Lamp Corp. for losses attributable to the
theft?
a. No liability since the ordinary examination cannot be relied on to detect defalcations.
b. No liability because privity of contract is lacking.
c. Liable for losses attributable to her or his negligence.
d. Liable only if it could be proved that he or she was grossly negligent.
5. Martin Corporation orally engaged Humm & Dawson to audit its year-end financial
statements. The engagement was to be completed within two months after the close of
Martin's fiscal year for a fixed fee of P250,000. Under these circumstances, what
obligation is assumed by Humm & Dawson?
a. None. The contract is unenforceable since it is not in writing.
b. An implied promise to exercise reasonable standards of competence and care.
c. An implied obligation to take extraordinary steps to discover all defalcations.
d. The obligation of an insurer of its work, which is liable without fault.
6. The role of persons entrusted with the supervision, control and direction of an entity
a. Governance
c. Government
b. Board of directors
d. Management
7. Which statement is correct regarding audit matters of governance interest?
a. These are matters that arise from the audit of financial statements and, in the opinion of
the auditor, are either important or relevant to those charged with governance in
overseeing the financial reporting and disclosure process.
b. These include only those matters that have come to the attention of the auditor as a
result of the performance of the audit.
c. The auditor is required, in an audit in accordance with PSAs, to design procedures for
the specific purpose of identifying these matters.
d. The auditor is not required to communicate these matters with those charged with
governance of an entity.
8. An auditors overall objective in a financial statement audit is to
a. Determine that all individual accounts and footnotes are fairly presented.
b. Employ the audit risk model.
c. Express an opinion on the fair presentation of the financial statements in accordance
with generally accepted accounting principles.
d. Detect all errors and fraud.
9. The primary responsibility for the adequacy of disclosure in the financial statements of a
publicly held company rests with the
a. Partner assigned to the audit engagement. c. Auditor in-charge of field work.
b. Management of the company.
d. Securities and Exchange Commission.
d. Gathering of the audit evidence necessary for the auditor to conclude that the financial
statements are free of material unintentional misstatements.
11. Which of the following ultimately determines the specific audit procedures necessary to
provide an independent auditor with a reasonable basis for the expression of an opinion?
a. the audit program.
c. generally accepted auditing standards.
b. the auditors judgment.
d. the auditors working papers.
12. If the auditor suspects that members of senior management, including members of the
board of directors, are involved in noncompliance to laws as regulations, and he believes
his report may not be acted upon, he would:
a. Do nothing.
b. Issue a disclaimer of opinion.
c. Consider seeking legal advice.
d. Make special investigation in order to fully determine the extent of clients
noncompliance.
13. Which of the following best describes a trend in litigation involving CPAs?
a. A CPA cannot render an opinion on a company unless the CPA has audited all affiliates
of that company.
b. A CPA may successfully assert as a defense that the CPA had no motive to be part of a
fraud.
c. A CPA may be exposed to criminal as well as civil liability.
d. A CPA is primarily responsible for a clients footnotes in an annual report filed with the
SEC.
14. Which one of the following, if present, would support a finding of constructive fraud on
the part of a CPA?
a. Privity of contract.
c. Intent to deceive.
b. Reckless disregard.
d. Ordinary negligence.
15. The limitation of auditor liability under contract law is known as
a. Privity of contract.
c. Contributory liability.
b. Statutory liability.
d. Common law liability
16. The auditor's defense of contributory negligence is most likely to prevail when
a. Third party injury has been minimal.
b. The auditor fails to detect fraud resulting from management override of the control
structure.
c. The client is privately held as contrasted with a public company.
d. Undetected errors have resulted in materially misleading financial statements.
17. The factor that distinguishes constructive fraud from actual fraud is
a. Materiality
c. Quality of internal control.
d. Intent.
d. Consider the risk of material misstatements in the financial statements resulting from
fraud or error.
2. Generally Accepted Auditing Standards (GAAS) and Philippine Standards on Auditing
(PSA) should be looked upon by practitioners as:
a. Ideals to work towards, but which are not achievable
b. Maximum standards which denote excellent work.
c. Minimum standards of performance which must be achieved on each audit
engagement.
d. Benchmark to be used on all audits, reviews, and compilations.
3. Which of the following best describes what is meant by Generally Accepted Auditing
Standards?
a. Pronouncements issued by the Auditing Standards and Practices Council.
b. Procedure to be used to gather evidence to support financial statements.
c. Rules acknowledged by the accounting profession because of their universal
compliance.
d. Measures of the quality of the auditors performance
4. A CPA should comply with applicable generally accepted auditing standards on every
engagement
a. Without exception
b. Except in examinations that result in a qualified report
c. Except in engagements where the CPA is associated with unaudited financial
statements.
d. Except in examinations of interim financial statements.
5. The general standards stress the importance of
a. The personal qualities which the auditor should have
b. Evidence accumulation
c. Communicating the auditors finding to the reader
d. All of the above
6. The Audit Standard which requires adequate technical training and proficiency is
normally interpreted as requiring the auditor to have
a. Formal education in auditing and accounting
b. Adequate practical experience for the work being performed
c. Continuing professional education
d. All of the above
7. Which of the following is not required by the Generally Accepted Auditing Standards that
states that due professional care is to be exercised in the performance of the audit?
a. Observance of the standards of field work and reporting
b. Critical review of the audit work performed at every level of supervision
c. Degree of skill commonly possessed by others in the profession.
to the effect that an opinion cannot be expressed. The objective of the fourth standard is
to prevent
a. An auditor from expressing different opinions on each of the basic financial statements.
b. Restrictions on the scope of the examination, whether imposed by the client or by the
inability to obtain evidence.
c. Misinterpretations regarding the degree of responsibility the auditor is assuming
d. An auditor from reporting on one basic financial statement and not the others.
14. What is the overriding reason why the auditor considers the professional competence of
assistants whom the work will be delegated?
a. All the audit assistants assigned to an engagement must be independent in appearance.
b. To have reasonable assurance that such work will be performed with due care by the
audit assistant.
c. To lessen the working paper preparation.
d. To eliminate audit risk.
15. A basic objective of a CPA firm is to provide professional services that conform with
professional standards. Reasonable assurance of achieving this basic objective is
provided through
a. A system of peer review.
b. Continuing professional education.
c. A system of quality controls.
d. Compliance with generally accepted reporting standards.
16. The examination by CPAs of a CPA firms auditing practices to ascertain compliance with
its quality control system
a. Compliance audit
c. Peer review
b. Examination
d. Quality control audit
17. The firm is to be staffed by personnel who have attained and maintained the technical
standards and professional competence required to enable them to fulfill their
responsibilities with due care is the objective of what quality control policy?
a. Professional Requirements
c. Assignment
b. Skills and Competence
d. Delegation
18. In connection with the element of professional development, a CPA firms system of
quality control should ordinarily provide that all personnel
a. Have the knowledge required to enable them to fulfill responsibilities assigned.
b. Possess judgment, motivation, and adequate experience.
c. Seek assistance from persons having appropriate levels of knowledge, judgment, and
authority.
d. Demonstrate compliance with peer review directives.
19. Within the context of quality control, the primary purpose of continuing professional
education and training activities, is to enable a CPA firm to provide personnel within the
firm with:
a. Technical training that assures proficiency as an auditor.
b. Professional education that is required in order to perform with due professional care.
c. Knowledge required to fulfill assigned responsibilities and to progress within the firm.
d. Knowledge required in order to perform a peer review.
20. It involves informing assistants of their responsibilities and the objectives of the
procedures they have to perform:
a. Supervision
c. Directing
b. Monitoring
d. Consultation
c. The quantity of audit evidence needed is affected by the risk of misstatement (the greater
the risk, the more audit evidence is likely to be required) and also by the quality of such
audit evidence (the higher the quality, the less may be required).
d. Merely obtaining more audit evidence may compensate for its poor quality
5. Which of the following statements is incorrect regarding relevance of audit evidence?
a. A given set of audit procedures may provide audit evidence that is relevant to certain
assertions, but not others.
b. The auditor often obtains audit evidence from different sources or of a different nature
that is relevant to the same assertion.
c. Obtaining audit evidence relating to a particular assertion is a substitute for obtaining
audit evidence regarding another assertion.
d. None of the above.
11. The most reliable form of documentary evidence are those documents that are
a. Prenumbered
b. Internally generated
c. Easily duplicated
d. Authorized by a responsible official
12. Which of the following presumptions does not relate to the competence of audit evidence?
a. The more effective internal control, the more assurance it provides about the accounting
data and financial statements.
b. An auditors opinion, to be economically useful, is formed within a reasonable time and
based on evidence obtained at a reasonable cost.
c. Evidence obtained from independent sources outside the entity is more reliable than
evidence secured solely within the entity.
d. The independent auditors direct personal knowledge, obtained through observation and
inspection, is more persuasive than information obtained indirectly.
13. You have been assigned to audit the maintenance department of an organization. Which of
the following is likely to produce the least reliable audit evidence?
a. Notes on discussions with mechanics in the maintenance operation.
b. A schedule comparing actual maintenance expenses with budgeted expenses and those of
the prior period and disclosing important differences.
c. A narrative covering review of user reports on maintenance service.
d. An analysis of changes in certain maintenance department ratios
14. This consists of checking the mathematical accuracy of documents or records.
a. Reperformance
b. Recalculation
c. Confirmation
d. Inspection
15. Which of the following audit procedures is used extensively throughout the audit and often is
complementary to performing other audit procedures?
a. Inspection
b. Observation
c. Inquiry
d. Confirmation
20. Working papers that record the procedures used by the auditor to gather evidence should be
a. Considered the primary support for the financial statements being audited.
b. Viewed as the connecting link between the books of accounts and the financial statements.
c. Designed to meet the circumstances of the particular engagement.
d. Destroyed when the audited entity ceases to be a client.
II. The auditor is to consider whether there are material uncertainties about the entitys ability to
continue as a going concern that needs to be disclosed in the financial statements.
III. The absence of any reference to going concern uncertainty in the auditors report is viewed as
a guarantee as to the entitys ability to continue as a going concern.
Which of the foregoing inappropriately describe(s) the auditors responsibility?
a. I only
b. I and II only
c. II only
d. III only.
A
Yes
Yes
Yes
B
No
No
Yes
C
Yes
No
Yes
D
No
Yes
Yes
9. Which of the following least likely affect the form and content of the overall audit plan?
11. Which of the following factors is inappropriately relevant to the managements assessment of
the going concern assumption?
a. The degree of uncertainty associated with the outcome of an event or condition decreases
significantly the further into the future of judgment being made about the outcome of an event or
condition.
b. Any judgment about the future is based on information available at the time at which the
judgment is made.
c. The size and complexity of the entity, and the nature and conditions of its business affect the
judgment regarding the outcome of events or conditions.
d. Subsequent events can contradict a judgment which was reasonable at the time it was made.
12. The management denied the auditors request that the management has to extend its
assessment of its going concern ability. However, the auditors other procedures are sufficient to
assess the appropriateness of management use of the going concern assumption in the
preparation of the financial statements. The auditor should issue:
a. Unqualified opinion
b. Unqualified opinion with explanatory paragraph
c. Adverse opinion
d. Disclaimer of opinion
13. To obtain an understanding of a continuing clients business in planning an audit, an auditor
most likely would
a. Perform tests of details of transactions and balances.
b. Review prior-year working papers and the permanent file for the client.
c. Read specialized industry journals.
d. Reevaluate clients internal control environment.
14. Analytical procedures used in planning an audit should focus on
a. Reducing the scope of tests of controls and substantive tests.
b. Providing assurance that potential material misstatements will be identified.
c. Enhancing the auditors understanding of the clients business.
d. Assessing the adequacy of the available evidential matter.
15. Analytical procedures, which means the analysis of significant ratios and trends including the
resulting investigation of fluctuations and relationships that are inconsistent with other relevant
information or which deviate from predicted amounts, are not required to be applied
a. At the planning stage of the audit
b. Overall review stage of the audit
c. As substantive procedures
d. None of the above
11. A sample in which every possible combination of items in the population has an equal chance
of constituting the sample is a
a. Representative sample
b. Statistical sample
c. Random sample
d. Judgment sample
12. The process which requires the calculation of an interval and then selects the items based on
the size of the interval is
a. Statistical sampling
b. Random selection
c. Systematic selection
d. Computerized selection
13. When the auditor goes through a population and selects items for the sample without regard
to their size, source, or other distinguishing characteristics, it is called
a. Block selection
b. Random selection
c. Systematic selection
d. Haphazard selection
14. Which of the following statistical selection techniques is least desirable for use by an
auditor?
a. Systematic selection
b. Stratified selection
c. Block selection
d. Sequential selection
15. For which of the following audit tests would an auditor most likely use attribute sampling?
a. Making an independent estimate of the amount of a FIFO inventory.
b. Examining invoices in support of the valuation of fixed asset additions.
c. Selecting accounts receivable for confirmation of account balances.
d. Inspecting employee time cards for proper approval by supervisors.
16. An auditor plans to test a sample of 20 checks for counter signatures as prescribed by the
clients control procedures. One of the checks in the chosen sample of 20 cannot be found. The
auditor should consider the reasons for this limitation and
a. Evaluate the results as if the sample size had been 19.
b. Treat the missing check as a deviation for the purpose of evaluating the sample.
c. Treat the missing check in the same manner as the majority of the other 19 checks, i.e.,
countersigned or not.
d. Choose another check to replace the missing check in the sample.
17. When using statistical sampling for tests of controls, an auditors evaluation would include a
statistical conclusion about whether:
a. Deviations in the population are within an acceptable range.
b. Monetary precision exceeds a predetermined amount.
c. The populations total monetary value is not in error by more than a predetermined
amount.
d. Population characteristics occur at least once in the population.
18. An auditor, planning an attribute sample from a large number of invoices, intends to estimate
the actual rate of deviations. Which factor below is the most important for the auditor to
consider?
a. Audit objective
b. Desired confidence level
c. Population size
d. Population variance
19. Whenever a sample is taken, there is a risk that the quantitative conclusions about the
population will be incorrect.
a. This is always true.
b. This is always true unless 100 percent of the population is tested.
c. This is true for statistical sampling, but not for non-statistical sampling.
d. This is true for non-statistical sampling but not for statistical sampling.
20. As lower acceptable levels of both audit risk and materiality are established, the auditor
should plan more work on individual accounts to
a. Find smaller misstatements.
b. Find larger misstatements.
c. Increase the tolerable misstatement in the accounts.
d. Decrease the risk of assessing control risk too low.