SOLVED

Learning Objective 15-4 1) Which of the following occurrences would be least likely to warrant further audit attention for the auditor? A) Deviations from client’s established control procedures. B) Deviations from client’s budgeted values. C) Monetary misstatements in populations of transaction data. D) Monetary misstatements in populations of account balance details. 2) What types of exceptions are auditors most concerned with when evaluating populations of accounting data? 3) The auditor may estimate the “estimated population exception rate” by taking a small preliminary sample from the current year’s data or by using the prior year’s experience with the client. A) True B) False 4) When a small preliminary sample is used to estimate the population exception rate, it (the preliminary sample) cannot be included in the ultimate sample. A) True B) False Learning Objective 15-5 1) The risk which the auditor is willing to take in accepting a control as being effective when the true population exception rate is greater than a tolerable rate is the: A) finite correction factor. B) tolerable exception rate. C) acceptable risk of assessing control risk too low. D) estimated population exception rate. 2) The exception rate the auditor will permit in the population and still be willing to reduce the assessed level of control risk is called the: A) tolerable exception rate. B) estimated population exception rate. C) acceptable risk of overreliance. D) sample exception rate. 3) If the auditor decides to assess control risk at the moderate level in a private company audit, when in previous years the auditor set control risk at the maximum level, then tests of controls for the current year would be: A) increased in number. B) reduced in number. C) not performed. D) unchanged from prior planned settings. 4) When the computed upper exception rate is greater than the tolerable exception rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to justify? A) Reduce the tolerable exception rate so as to accept the sample results. B) Expand the sample size and perform more tests. C) Revise the assessed control risk. D) Write a letter to management which outlines the control deficiencies. 5) Which of the following would have the least impact in determining sample size for tests of controls? A) Expected population exception rate. B) Risk of assessing control risk too low. C) Tolerable exception rate. D) Population size. 6) Which of the following represents the best description of the tolerable exception? A) The highest exception rate the auditor will permit in the control being tested and still conclude it is operating effectively. B) The highest exception rate the auditor expects to find in the population. C) The number of exceptions found in the sample divided by the sample size. D) The highest estimated exception rate in a population at a given ARACR.