Audit Sampling – CA Inter Audit Questions bank is designed strictly as per the latest syllabus and exam pattern.
Audit Sampling – CA Inter Audit Question Bank
Question 1.
State with reasons (in short) whether the following statement is true or false. While auditing the accounts of a company, it is obligatory that the auditor must adopt sampling technique. (Nov 2009, 2 marks)
Answer:
False:
It is not obligatory that the auditor must adopt sampling technique while auditing the accounts of a company. But he should ensure that the relevant standard on auditing has been followed. It is in the interest of the auditor if he decides to forni his opinion on the basis of audit sample using standards and techniques which are widely followed and recognized.
Question 2.
It is imperative for the auditor to project misstatements for the population while performing audit procedures through sampling. Comment. (Nov 2020, 3 marks)
Question 3.
Write short note on Advantages of Statistical sampling in Auditing. (May 2000, Nov 2011, May 2014, 5,4,4 Marks)
Answer:
Statistical Sampling
Meaning
Statistical sampling involves use of mathematical and statistical techniques to determine the appropriate sample size. Under this the samples are determined by (i) theory of probability, and (ii) theory of random numbers. These sampling have a wide usage n the case of homogenous population. Selection of sample involves quantifiable relationship between sample size and degree of risk.
| Advantages of Statistical Sampling. | |
| 1. Scientific | It is more scientific as the judgement is replaced by mathematical and statistical techniques. |
| 2. Sample selection more objective | The selection of sample is more objective. |
| 3. Possibility of Measuring of Risk | it enables the auditor to measure the risk he takes for expressing a particular opinion. |
| 4. High degree of refinement | It involves high degree of refinement due to the use of statistical procedures, rules, formulas and tables. |
| 5. Means for taking calculated risks | It also provide a means for taking a calculated risk and corresponding precision i.e., the probable difference in the result due to checking of transaction on sample basis In lieu of checking the entire universe. |
| 6. Better description of large mass of data | It may provide a better description of large mass of data than a complete examination of all date. |
Question 4.
State with reason (in short) whether the following statement is correct or incorrect Cluster sampling is less effective than random sampling. (May 2016,2 marks)
Answer:
Correct:
Cluster saniphng is less effective than random sampling.
Question 5.
Examine with reasons (In short) whether the following statement is correct or incorrect:
When statistical sampling is used to select a sample, sample need not be representative because the statistical sampling takes care of the representation. (May 2018, 2 marks)
Answer:
Incorrect:
Whatever may be the approach non-statistical or statistical sample, the sample must be representative. This means that it must be closely similar to the whole population although not necessarily exactly the same. The sample must be large enough to provide statically meaningful results.
Question 6.
Discuss the following:
Factors that should be considered for deciding upon the extent of checking on a sampling plan. (Nov 2018, 5 marks)
Answer:
The factors that should be considered for deciding upon the extent of checking on e sampling plan are following:
- Size of the organization under audit
- State of the internal control.
- Adequacy and reliability of books and records.
- Tolerable error range.
- Degree of the desired confidence.
Question 7.
Examine with reasons whether the following statement is correct or incorrect.
(f) The non-statistical sampling in criticized on the grounds that it is neither objective nor scientific. (Nov 2019, 2 marks)
Answer:
Correct:
The non-statistical sampling is criticized on the grounds that it is neither objective nor scientific. The expected degree of objectivity cannot be assured In non-statistical sampling because the risk of personal bias in selection of sample items cannot be eliminated. The closeness of the qualities projected by the sample results with that of the whole population cannot be measured because the sample has not been selected in accordance with the mathematically based statistical techniques.
Question 8.
“The auditor is faced with sampling risk n both tests of control and substantive procedures”. Comment on this statement with reference to SA 530 on Audft Samphng. (Nov 2010, 8 marks)
OR
Sampling risk can lead to erroneous conclusions. Justify (May 2019, 4 marks)
Answer:
As per SA 530 1Audlt Sampling’
Audit sampling helps the auditor to obtain and evaluate audit evidence about some characteristics of the items selected in order to form or conclusion concerning the population from which the sample is drawn. Audit sampling can be applied using either non-statistical or statistical sampling approaches.
At the time of designing a sample, the auditor determines tolerable misstatement order to address the risk that the aggregate of individually immaterial misstatements may cause the financial statements to be materially misstated and provide a margin for possible undetected misstatements.
The risk that the auditor’s conclusion based on a sample may be different from the conclusion if the entire population were subjected to the same audit procedure.
Sampling risk can lead to two types of Incorrect conclusions:
(i) In the case of a test of controls, that controls are more effective than they actually are, or in the case of a substantive procedure, that a material misstatement does not exist when in fact it does.
The auditor is primarily concerned with this type of Incorrect conclusion because it affects audit effectiveness and is more likely to lead to an inappropriate audit opinion.
(ii) In the case of a test of controls, that controls are less effective than they actually are, or In the case of a substantive procedure, that a material misstatement exists when in fact it does not.
This type of incorrect conclusion affects audit efficiency as it would usually lead to additional work to establish that initial conclusions were incorrect.
Question 9.
Write short note on Stratified Sampling (2011 – May 4 marks)
Answer:
Stratified Sampling:
1. Under this method, the population is divided Into different classes or strata. Each stratum is treated as if it were a separate population and a sample is taken from each such class of stratum.
2. The number of groups into which the whole population has to be divided is determined on the basis of auditors judgment.
Example: In debtor confirmation, the auditor may classify customers based on:
- Geographic locations,
- Amount receivable,
- Volume of transactions, etc.
In each class or stratum, he may choose different sample sizes for verification.
3. This method is appropriate for a highly diversified population. Weights are allocated to reflect these differences and different sample sizes are drawn from each class.
Question 10.
Discuss the following:
As per SA 530, meanIng of audit sampling, sample design, sample size, and selection of items for testing. (Nov 2013, 5 marks)
OR
Discuss the following:
With reference to SA -530. meaning of audit sampling and requirements relating to sample design, sample size, and selection of items for testing. (May 2016, 5 marks)
Answer:
Meaning of Audit Sampling:
As per SA- 530, sampling refers to selecting less than 100% items of the population. In this techniques, all sampling units have an equal chance of selection. It shall provide the auditor with a reasonable basis on which to draw conclusions about entire population.
Requirements relating to sample size, sample design, and selection of Items for testing:
When designing an audit sample, the auditor shall require to consider the following matters.
- The auditor shall consider the purpose of the audit procedure and the characteristics of the population from which ‘the sample will be drawn.
- The auditor shall determine a sample size sufficient to reduce sampling risk to an acceptably low level. The level of sampling risk that the auditor is willing to accept affects the sample size required. The lower the risk the auditor is willing to accept, the greater the sample size will need to be.
- The auditor shall select items for the sample in such a way that each sampling unit In the population has a chance of selection.
Question 11.
Write short notes on Random Sampling. (May 2015, 4 marks)
Answer:
Random Samphng:
In this sampling, all items in the population or within each class have an equal or known chance of selection. It may involve use of random number table. (t means obtaining samples randomly from the populations.
There are two types of Random Sampling:
1. SImple Random Sampling:
In this method, each unit of the population has an equal chance of being selected. The selection may be based on random number tables, with the help of computers or by picking up numbers randomly from a drum. It is appropriate In case of the homogeneous population with all Items falling within a reasonable range.
2. Stratified Random Sampling:
The population is divided into different classes or strata. Each Stratum is treated as if it were a separate population and a sample is taken from each such class or stratum. The number 0f groups into which the whole population has to be divided la determined on the basis of auditors’ judgment e.g. in debtors’ confirmation, Auditors may classify customers based on – geographic locations or amount receivable or volume of transactions etc. In each class or stratum, he may choose different sample sizes for verification. It is appropriate for a highly diversified population, that weights are allocated to reflect these differences, and different sample sizes are drawn from each class.
Question 12.
In the context of SA 530 ‘Audit Sampling’, explain the terms ‘Sampling Risk’ and ‘Non-Sampling’ risk. (Jan 2021, 4 marks)
Multiple Choice Question
Question 1.
Sampling is a …………………. theory used by and auditor during the audit process
(a) Mathematical
(b) Statistical
(c) Economic
(d) Arbitrary
Answer:
(b) Statistical
Question 2.
Statistical theory of sampling is based on a …………………… .
(a) statistical law
(b) mathematical law
(c) scientific law
(d) economic law
Answer:
(c) scientific law
Question 3.
Audit Sampling In defined under
(a) SA – 220
(b) SA – 318
(c) SA – 360
(d) SA – 530
Answer:
(d) SA – 530
Question 4.
Auditor should select sample items in such a way that the sample can be expected to be representative of the
(a) groups
(b) population
(c) sampling
(d) arbitrary population
Answer:
(b) population
Question 5.
Sample is a comprehensive term than population
(a) True
(b) False
(c) Partly True
(d) None
Answer:
(b) False
Question 6.
Auditor should ensure the population is ……………….. for fixing the audit procedure
(a) absolute
(b) adequate
(c) appropriate
(d) evident
Answer:
(c) appropriate
Question 7.
Characteristics of population except
(a) Appropriateness
(b) Completeness
(c) Insufficient
(d) Reliable
Answer:
(c) Insufficient
Question 8.
Audit sampling disables the auditor to obtain and evaluate audit evidence for forming a conclusion
(a) Statement is correct
(b) Statement is incorrect
(c) Statement is partially correct
(d) None of them
Answer:
(b) Statement is incorrect
Question 9.
……………. is a approach to sampling that has the random selection of sample Items
(a) Statistical sampling
(b) Non-statistical sampling
(c) (a) or (b)
(d) (a) and (b)
Answer:
(a) Statistical sampling
Question 10.
Characteristics of statistical sampling approach excludes.
(a) An approach to sampling that has the random selection of the sample items
(b) Entire population can be used as a sample for decision making
(c) The use of probability theory to evaluate sample results
(d) The use of probability theory including measurement of sampling risk characteristics
Answer:
(b) Entire population can be used as a sample for decision making
Question 11.
The decision whether to use a statistical or non-statistical sampling approach is a matter for the
(a) size and nature of the business
(b) managerial decisions
(c) auditors judgment
(d) audit procedure required
Answer:
(c) auditors judgment
Question 12.
The sample must be ………………… to provide statistically meaningful results.
(a) smallest one
(b) large
(c) large enough
(d) equal to the population
Answer:
(c) large enough
Question 13.
Audit testing done through statistical sampling is …………………. than testing based entirety on the auditor own judgement
(a) more statistical
(b) more specific
(c) more systematic
(d) more scientific
Answer:
(d) more scientific
Question 14.
Under non-statistical sampling, the sample size and its composition are determined n the basis of the ……………….. .
(a) Standard et Auditing
(b) Accounting standards & SAs
(c) Personal experience and knowledge of the auditor
(d) Decisions taken by management
Answer:
(c) Personal experience and knowledge of the auditor
Question 15.
The non-statistical sampling in criticized on the ground that it is
(a) a non-systematic system
(b) a non-specific and non systematic
(c) neither objective non-scientific
(d) not as per the auditing standards
Answer:
(c) neither objective non-scientific
Question 16.
Factor that should not be considered for deciding upon the extent of checking on a sampling plan is …………….. .
(a) Size of the organization and state of the internal control
(b) Adequacy and reliability of books and records
(c) Letter of Engagement
(d) Tolerable error range and degree of the desirable confidence
Answer:
(c) Letter of Engagement
Question 17.
If is a mathematical truth that the sample, if picked purely on a ………………… would reveal the feature and characteristics of the population,
(a) Statistical sampling basis
(b) Random basis
(c) Continuous basis
(d) Intermittent basis
Answer:
(b) Random basis
Question 18.
Under statistical sampling, the sample results are measurable as to the ……………… of the audit objectives
(a) adequacy
(b) reliability
(c) appropriateness
(d) adequacy and reliability
Answer:
(d) adequacy and reliability
Question 19.
In non-statistical sampling the auditors opinion determines the sample size …………………… now far the sample size would fulfill the audit objective
(a) and also measured
(b) but it cannot be measured
(c) but It may or may not measure
(d) Any of the above
Answer:
(b) but it cannot be measured
Question 20.
Sample size is …………………. a valid criterion to a distinguish between statistical and non-statistical approaches.
(a) a valid
(b) a not valid
(c) a adequate
(d) a only
Answer:
(b) a not valid
Question 21.
In designing an audit sample, auditor shall consider the
(a) purpose of the audit procedure
(b) characteristics of the population
(c) (a) or (b)
(d) (a) and (b)
Answer:
(d) (a) and (b)
Question 22.
The auditor shall deté’rmine a sample size sufficient to reduce sampling risk …………… .
(a) to a high level
(b) to a very low level
(c) to an acceptably low level
(d) to a moderate level
Answer:
(c) to an acceptably low level
Question 23.
Which of the following factors is (are) considered in determining the sample size for tests of control?
(a) Projected error
(b) Tolerable error
(c) Expected error
(d) Both (b) and (c)
Answer:
(d) Both (b) and (c)
Question 24.
………………… provides, guidance to the auditor on the use of stratification and value-weighted sampling techniques
(a) SA – 300
(b) SA – 320
(c) SA – 500
(d) SA – 530
Answer:
(d) SA – 530
Question 25.
…………………………… may be improved if the auditor stratifies a population by dividing it into discrete sub-populations which have an similar characteristics
(a) Audit evidence
(b) Audit efficiency
(c) Audit trail
(d) Audit procedure
Answer:
(b) Audit efficiency
Question 26.
Stratification allows sample size to be reduced
(a) with increasing sampling nsk
(b) without decreasing sampling risk
(c) without increasing sampling risk
(d) with decreasing sampling risk.
Answer:
(c) without increasing sampling risk
Question 27.
The process of Inspecting, cleaning transforming and modelling data with the goal of highlighting useful information, suggesting conclusions and supporting decision-making is defined as
(a) Data Science
(b) Data Analysis
(c) Data Analytics
(d) Data interpretation
Answer:
(c) Data Analytics
Question 28.
The principal method(s) of selecting samples is (are) the use of
(a) Random selection
(b) Systematic selection
(c) Haphazard selection
(d) All of them
Answer:
(d) All of them
Question 29.
……………… is considered appropriate provided the population to be sampled consists of reasonably similar units and fall within a reasonable range
(a) Simple random sampling
(b) Stratified sampling
(c) Systematic sampling
(d) Haphazard sampling
Answer:
(a) Simple random sampling
Question 30.
…………….. is a selection method in which the number of sampling units in the population Is divided by the sample size to give a sampling interval.
(a) Simple Random Sampling
(b) Stratified Sampling
(c) Systematic Sampling
(d) Block Sampling
Answer:
(c) Systematic Sampling
Question 31.
Sampling in which sample size selection and evaluation results in a conclusion in monetary amount.
(a) Stratified Sampling
(b) Interval Sampling
(c) Haphazard Sampling
(d) Monetary Unit Sampling
Answer:
(d) Monetary Unit Sampling
Question 32.
Risk that the auditor’s conclusion based on a sample may be different from the conclusion if the entire population where subjected to the same audit procedure ¡s known as
(a) Audit Risk
(b) Sampling Risk
(c) Non-sampling Risk
(d) Population Risk
Answer:
(b) Sampling Risk
Question 33.
Non-Sampling risk can be measured mathematically. This statement ¡s
(a) True
(b) False
(c) Partially True
(d) None
Answer:
(b) False