Indicate whether you agree or disagree with the following statements and explain your reasoning. Joseph Cabana was explaining to Carl Metz how sampling risk works for the audit team: "Non- sampling risk is the risk that as auditors we will arrive at a conclusion that has nothing to do with sampling issues." Kendal Clarke was auditing the miscellaneous expense account. She decided to chose every transaction that had a value of $20,000 or higher. Kendal is performing a statistical sampling technique known as systematic selection. Melissa Wilson had concluded that control risk was low for her audit client. Therefore, she decided that the most appropriate audit strategy was a combined audit strategy.
Q: Attribute Sampling and Monetary-Unit Sampling are two sampling techniques designed to help an…
A: Monetary-Unit Sampling and Attribute Sampling are two different type of sampling techniques widely…
Q: General Attributes Sampling. You overheard the following dialogue between Joe Ashley(a staff…
A: Hello, since your question has multiple sub parts we will solve the first three questions for you.…
Q: Monetary Unit Sampling with IDEA: Determining Sample Size and Selecting Sample Items. Assume that…
A:
Q: different types of sampling risks
A: Audit sampling is a part of auditing in which auditor selects some of the samples from the…
Q: It is important to recognize that audit sampling may be constructed on a nonstatistical basis. If…
A: a) The extent to which statistical sampling enhances the quality of the audit evidence - The use of…
Q: You and a friend are studying audit sampling together. Your friend is having a hard time…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: The unique feature of monetary unit sampling is thata. Sampling units are not chosen at random.b. A…
A:
Q: Sample Size and Sampling Interval Determination: Monetary Unit Sampling. BlytheDrake is conducting…
A: Definition:
Q: A component of an account balance has a recorded balance of $10,000 and an audited valueof $8,000.…
A: Misstatement in accounting is defined as the difference between audited value and book value of…
Q: • The Choose the answer from the menu in accordance to the question statement _--- method includes…
A: There are many two types of sampling approaches used when auditing the financial statement of the…
Q: Sample Size and Sampling Interval Determination: Monetary Unit Sampling. CaseyPaul is considering…
A: Hey, since there are multiple requirements posted, we will answer first three requirements. If you…
Q: Which one of the sentences below is FALSE? A. The risk of incorrect acceptance called beta risk has…
A: Auditing means the independent checking of company operation by outsider. Auditor is qualified and…
Q: In using difference estimation, an auditor took a random sampleof 100 inventory items from a large…
A: Sampling Risk: A sampling risk refers to the risk that can arise from the auditor’s conscious…
Q: When the computed upper exception rate is greater than the tolerable exception rate, it is necessary…
A: When the CUER (i.e. computed upper exception rate) is greater than the TER (i.e. tolerable exception…
Q: When the auditor has assessed control risk of a particular area at a reduced level, he or she will…
A: The question is multiple choice question. Required Choose the Correct Option.
Q: Audit sampling involves applying an audit procedure to less than 100 percent of the population for…
A: Sampling Risk :- Sampling threat is the opportunity that the objects decided on in a pattern…
Q: Auditors must be aware of sampling risks because: A The risk of type 2 error due to increased…
A: The Type 2 error is failing to detect a material misstatement in the financial statements. Type 1…
Q: When the auditor uses monetary unit statistical sampling to examine the totaldollar value of…
A: Auditor is the independent personnel who is responsible for checking the financial information and…
Q: Discuss audit sampling for tests of details of balances and for tests of controls and substantive…
A: Audit sampling is the procedure applied to less than hundred percentage of the transactions under…
Q: Sample Size Determination. Jule Phillips is examining the internal control of CowboyCompany and has…
A: a. Note .Refer to sample size table
Q: Which of the following courses of action would an audit team most likelyfollow in planning a sample…
A: Variables sampling: Variables sampling is a model that is used for examining a population for…
Q: Which of the following is an advantage of nonstatistical sampling?a. It measures the audit team’s…
A: Non-statistical sampling: It refers to the method of sampling where the selection of the sample is…
Q: TRUE OR FALSE When sampling is used by an auditor, an element of uncertainty is present in the…
A: ‘’Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Assume that you have selected a random sample of 15 checks from a population of 800 checks. The…
A: Audit sampling is the audit procedure which is applied to items less than 100% in the category…
Q: You are auditing the financial statements of Blue Pty Ltd, a whitegoods wholesaler. You ask the…
A: Objective of checking Purchase details during the audit of Financial statement. The main objective…
Q: An example of sampling for attributes would be estimating the A.Peso value of accounts receivable B.…
A: In the given case an example for attribute sampling will be based on the population of the sample…
Q: Mistakes in a Monetary Unit Sampling Application. Kelsey Mead, CPA, was engaged toaudit Jiffy…
A: The process of recording, summarizing, and reporting all transactions in a company's financial…
Q: Evaluating Sample Results: Nonstatistical Sampling. Finley Gunny is using nonstatistical sampling in…
A: Classical variable sampling: It is a sampling method in which each record is considered as a…
Q: In non-statistical sampling, _______. the auditor determines samples size, sample selection…
A: Note: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: In audit sampling applications, sampling risk isa. A characteristic of statistical sampling…
A: Answer: Option d
Q: For each population, did the auditor select a smaller sample size than is indicated by using the…
A: As per the guidelines we can can provide the solution for 3 sub part only. To get the answer of…
Q: Francona Madden, an audit manager, considered the control risk assessments listed in theleft column…
A: Acceptable risk of overreliance is the risk that the auditor is willing to take of accepting control…
Q: Which of the following statements is not true with respect to nonstatistical sampling?a. It cannot…
A: Sampling allows an individual to obtain the information about the population of interest in the…
Q: Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Carson Allister is performing an…
A: Accounts receivable refers to that amount which is not yet recovered. In the business, the sales are…
Q: STATEMENT 1: If the sampling unit is defined as the individual disbursement entry in the check…
A: The question is related to Audit Sampling. Audit sampling is tool that in which less than 100% of…
Q: Which of the following statements about attribute sampling is correct? A. Larger transactions…
A: An audit can be defined as the independent examination of the financial statements by the auditor.…
Q: If the auditor concludes that audit sampling has not provided a reasonable basis for conclusions…
A: Audit sampling is an investigative technique in which a sample of fewer than 100% of the total items…
Q: Audit sampling should not be applied to which of the following audit procedures? A. Physically…
A: Audit sampling is the procedure that is applied to the selected item of the population to form an…
Q: Non-statistical sampling is commonly used in audit practice. Describe each of the four items…
A: Audit sampling is a method of investigation in which a sample of less than 100% of the total items…
Q: In using audit sampling for exception rates: the auditor wants to know the most the exception…
A: The auditor is the person who conduct audit of the financial statements and who is responsible of…
Q: In evaluating the results of audit sampling in test of details which sentence below is FALSE? A.…
A: Auditing means to check whether the results are as per assumptions or calculations made at the…
Q: Which of the following statements is not true with respect to the calculation of the upperlimit on…
A: Here the reference is from ISA - 530 "Audit sampling"
Q: e misstatements found in the sample to the population when using statistical sampling, but not when…
A: In statistical analysis, sampling is act of selecting a specific number of observations from larger…
Q: General Sampling. The accounting firm of Mason & Jarr performed the work described ineach of the…
A: Answer: (a). He should also check the purchase requisition and also check the records of purchase…
Q: When using sampling in the study of internal control, the audit team would compare theupper limit…
A: Auditing refers to the examination of the financial information and data and evaluate the financial…
Step by step
Solved in 3 steps
- In an audit sampling application, an auditora. Performs procedures on all items in a balance and makes a conclusion about the entirebalance.b. Performs procedures on less than 100 percent of the items in a balance and formulates aconclusion about the entire balance.c. Performs procedures on less than 100 percent of the items in a class of transactions tobecome familiar with the client’s accounting system.d. Performs analytical procedures on the client’s unaudited financial statements when planning the audit.The auditors of Landi Corporation wish to use a structured approach to nonstatistical sampling to evaluate the reasonableness of the accounts receivable. Landi has 15,000 receivable accounts with a total book value of $2,500,000. The auditors have assessed the combined level of inherent and control risk at a moderate level and believe that their other substantive procedures are so limited as to require a “maximum” risk assessment. After considering the overall audit plan, the auditors believe that the test’s tolerable misstatement is $57,500. Use figure below to determine the reliability factor. Please calculate the sample size. Risk That Other Substantive Procedures Will Fail to Detect a Material Misstatement Combined Assessment of Inherent and Control Risk Maximum Moderate Low Maximum 3.0 2.3 1.9 Slightly below Maximum 2.7 2.0 1.6 Moderate 2.3 1.6 1.2 Low 1.9 1.2 1.0Evaluating a Sampling Application. Tom Barton, an assistant accountant with a local CPAfirm, recently graduated from Other University. He studied statistical sampling for auditing in college and wants to impress his employers with his knowledge of modern auditingmethods.Barton decided to select a random sample of payroll checks for the test of controls usinga tolerable rate of deviation of 5 percent and an acceptable risk of overreliance of 5 percent. The senior accountant told Barton that 2 percent of the checks audited last year hadone or more errors in the calculation of net pay. He decided to audit 100 random checks.Because supervisory personnel had paychecks with higher amounts than production workers, he selected 60 of the supervisor checks and 40 checks of the others. He was very carefulto see that the selections of 60 from the April payroll register and 40 from the August payrollregister were random.The audit of this sample yielded two deviations, exactly the 2 percent rate…
- Jerry Tim is examining an important internal control in the audit of Langly Company. Inpast audits, deviations from this control have been observed at a minimal rate (less than 0.1percent); however, because the account balance affected by this control is highly susceptibleto fraud, it is important that Tim obtain a high level of assurance that deviations occur at nohigher than a predetermined (low) rate. Which of the following sampling methods wouldTim most likely use to evaluate this control?a. Attributes sampling.b. Discovery samplingJerry Tim is examining an important internal control in the audit of Langly Company. Inpast audits, deviations from this control have been observed at a minimal rate (less than 0.1percent); however, because the account balance affected by this control is highly susceptibleto fraud, it is important that Tim obtain a high level of assurance that deviations occur at nohigher than a predetermined (low) rate. Which of the following sampling methods wouldTim most likely use to evaluate this control?a. Attributes sampling.b. Discovery sampling c. Sequential sampling.d. Statistical sampling.You and a friend are studying audit sampling together. Your friend is having a hard time understanding the various aspects of risk associated with attribute sampling and has put together the following list of questions she wants to discuss with you. Answer each question. a. What is:■Audit risk?■Inherent risk?■Control risk?■Controllable risk?■Residual risk? b. What is sampling risk? How is sampling risk controlled? c. What are the two aspects of sampling risk that an internal auditor is concerned with when testing controls? Briefly describe each aspect. d. What is nonsampling risk? How is nonsampling risk controlled?
- A CPA company is conducting the audit of Finch Hardware Company for the year ended December 31. The senior-in-charge of the audit plans to use MUS to audit Finch’s inventory account. The balance at December 31 was $9,000,000, tolerable misstatement is $360,000, expected misstatement is $90,000, and the risk of incorrect acceptance is 5%. Compute the required MUS sample size and sampling interval using Table 8-5 in the textbook (round your interval answer to the nearest whole number).The auditor is evaluating the internal control of a new client. Management has prepared its assessment of internal control and has concluded that it has some deficiencies but no significant deficiencies and no material weaknesses. However, in reviewing the work performed by management, including the internal auditor, the auditor observes the following: -Sample sizes taken by the internal auditor were never more than ten transactions, and most of the tests of operating effectiveness were based on a sample of one performed as part of a walkthrough of a transaction.-Management has fired the former CFO and a new CFO has not been appointed, but management indicates it has depth in the accounting area and is searching for a new CFO.-The company has no formal whistleblowing function because management has an “open-door” policy so that anyone with a problem can take it up the line.-Management’s approach to monitoring internal control is to compare budget with actual expenses and investigate….Dan and Lily, two audit staff associates are discussing audit sampling while working on the audit of a major client. Dan is explaining to Lily the various audit sampling methods that he has seen being used by audit managers. Dan asks Lily if she has ever heard of the ratio method with respect to evaluating sample results. Lily replies that she has not, so they decide to ask their supervisor, Brad. What would be the best answer from Brad to appropriately answer this question
- An audit firm is conducting the audit of Diaz Construction Company for the fiscal year ended October 31. Rebecca Smith, the partner in charge of the audit, decides that MUS is the appropriate sampling technique to use in order to audit Diaz’s inventory account. The balance in the inventory at October 31 was $4,250,000. Rebecca has established the following: risk of incorrect acceptance = 5% (i.e., the desired confidence level of 95%), tolerable misstatement = $212,500, and expected misstatement = $63,750. Calculate the sample size and sampling interval using Table 8-5 in the textbook (round your interval answer to the nearest whole number).In an MUS sample with a sampling interval of $5,000, an auditor discovered that aselected accounts receivable with a recorded amount of $10,000 had an audit valueof $8,000. If this is the only error discovered by the auditor, the projected error ofthe sample would be(1) $1,000. (3) $4,000.(2) $2,000. (4) $5,000.Field, CPA, is auditing the financial statements of MillerMailorder, Inc. (MMI). Field has compiled a list of possible inherentand fraud risks in the revenue cycle that may result in the misstatementof MMI’s financial statements and a corresponding list ofinternal controls, which, if properly designed and implemented,could assist MMI in preventing or detecting material misstatements.For each risk numbered 1 through 15 in column 1, select one internalcontrol from column 2 (labeled a. through t.), which, if properlydesigned and implemented, most likely could assist MMI in preventingor detecting material misstatements. Internal controls can beselected for more than one risk.