The following questions relate to nonstatistical and monetary unit sampling. Choose the best response.
a. A number of factors influence the sample size for a substantive test of details of an
account balance. All other factors being equal, which of the following would lead to
a larger sample size?
(1) Greater reliance on internal control
(2) Greater reliance on substantive analytical procedures
(3) Smaller expected frequency of errors
(4) Smaller measure of tolerable misstatement
b. The risk of incorrect acceptance relates to
(1) substantive tests and affects audit efficiency.
(2) substantive tests and affects audit effectiveness.
(3) tests of controls and affects audit efficiency.
(4) tests of controls and affects audit effectiveness.
c. In a probability-proportional-to-size sample with a sampling interval of $3,000,
which of the following is true?
I. An overstatement error of $200 in an item recorded at $300 will result in a
projected error of $2,000.
II. An overstatement error of $700 in an item recorded at $3,500 will result in a
projected error of $600.
(1) I only
(2) II only
(3) Both I and II
(4) Neither I nor II