ADA Statistical Sampling and Hypothesis Testing 1 — Questions and Answers
Question 1: Which sampling method ensures every item in the population has an equal chance of being selected for audit testing?
- Judgmental sampling
- Simple random sampling (Correct answer)
- Stratified sampling
- Cluster sampling
Correct answer: Simple random sampling
Simple random sampling gives every population item an equal probability of selection, eliminating selection bias.
Question 2: In hypothesis testing for audit analytics, what does a p-value of 0.03 indicate when the significance level is 0.05?
- Fail to reject the null hypothesis
- Reject the null hypothesis (Correct answer)
- Increase the sample size
- Accept the alternative hypothesis as fact
Correct answer: Reject the null hypothesis
Since 0.03 < 0.05, the result is statistically significant and the auditor rejects the null hypothesis.
Question 3: Which type of sampling divides a population into subgroups and samples from each subgroup proportionally?
- Systematic sampling
- Cluster sampling
- Stratified random sampling (Correct answer)
- Monetary unit sampling
Correct answer: Stratified random sampling
Stratified random sampling segments the population into homogeneous strata and draws samples from each, improving precision.
Question 4: A Type I error in audit hypothesis testing occurs when the auditor:
- Fails to detect a material misstatement that exists
- Concludes a misstatement exists when it does not (Correct answer)
- Uses an incorrect significance level
- Selects too small a sample size
Correct answer: Concludes a misstatement exists when it does not
A Type I error (false positive) means rejecting a true null hypothesis — concluding a problem exists when the population is actually clean.
Question 5: Monetary Unit Sampling (MUS) is best suited for audit populations where:
- Errors are expected to be large in number but small in value
- The population contains zero balances only
- Higher-value items should have a greater chance of selection (Correct answer)
- Population size is too small for statistical methods
Correct answer: Higher-value items should have a greater chance of selection
MUS weights selection probability by dollar amount, automatically giving larger balances a higher chance of being tested.
Question 6: When determining sample size for statistical sampling in an audit, increasing the desired confidence level will:
- Decrease the required sample size
- Have no effect on sample size
- Increase the required sample size (Correct answer)
- Reduce tolerable misstatement
Correct answer: Increase the required sample size
Higher confidence requires more evidence, so the required sample size increases to achieve that level of assurance.
ADA Statistical Sampling and Hypothesis Testing 1
Which sampling method ensures every item in the population has an equal chance of being selected for audit testing?