Which of the following courses of action would an audit team most likelyfollow in planning a sample of cash disbursements if the audit team is aware of several unusually large cash disbursements?a. Increase the sample size to reduce the effect of the unusually large disbursements.b. Continue to draw new samples until all unusually large disbursements appear in the sample.c. Set the tolerable deviation rate at a lower level than originally planned.d. Stratify the cash disbursements population so that the unusually large disbursements are selected.

Which of the following courses of action would an audit team most likelyfollow in planning a sample of cash disbursements if the audit team is aware of several unusually large cash disbursements?a. Increase the sample size to reduce the effect of the unusually large disbursements.b. Continue to draw new samples until all unusually large disbursements appear in the sample.c. Set the tolerable deviation rate at a lower level than originally planned.d. Stratify the cash disbursements population so that the unusually large disbursements are selected.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments

Section: Chapter Questions

Problem 24CYBK

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Similar questions

In audit sampling applications, sampling risk isa. A characteristic of statistical sampling applications but not of nonstatistical applications.b. The probability that the audit team will fail to recognize erroneous accounting in the client’sdocumentation.c. The probability that accounting misstatements will arise in transactions and enter theaccounting system.d. The probability that an audit team’s conclusion based on a sample might be differentfrom the conclusion based on an audit of the entire population.
Which of the following statements is not true with respect to the calculation of the upperlimit on misstatements?a. The tainting percentage is determined based on the difference between the recorded balance and the audited value.b. A separate incremental allowance for sampling risk is calculated for each misstatementdiscovered by the auditor.c. If no misstatements are detected, the basic allowance for sampling risk equals zero.d. The projected misstatement is determined by multiplying the sampling interval by thetainting percentage.
Attribute sampling enables the auditor to directly assess whether a rule is operating successfully or not, sampling is more reliable for assessing controls. This is crucial in circumstances where data accuracy or completeness are essential, such as when a credit-check control is used for consumer orders. The focus is on estimating the overall monetary value of a population, therefore monetary-unit sampling is more suitable for verifying the accuracy of financial statements or specific account balances. It is crucial to remember that the exact audit objectives and the type of data being checked will determine the sampling technique that is used. Do you believe monteray unit sampling can do the same thing?
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 sampling
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 sampling c. Sequential sampling.d. Statistical sampling.
In using audit sampling for exception rates: the auditor wants to know the most the exception rate is likely to be. sampling error is the likelihood that the auditor will miss a monetary misstatement. the upper limit of the interval estimate is known as the sampling risk. CUER cannot be considered in the context of specific audit objectives.
The unique feature of monetary unit sampling is thata. Sampling units are not chosen at random.b. A dollar unit selected in a sample is not replaced before the sample selection is completed.c. Auditors need not worry about the risk of incorrect acceptance decision.d. The population is defined as the number of monetary units in an account balance or class of transactions.
When the auditor uses monetary unit statistical sampling to examine the totaldollar value of invoices, each invoice(1) has an equal probability of being selected.(2) can be represented by no more than one monetary unit.(3) has an unknown probability of being selected.(4) has a probability proportional to its dollar value of being selected.
An auditor who uses statistical sampling for attributes in testing internal controlsshould reduce the planned reliance on a prescribed control when the(1) sample exception rate plus the allowance for sampling risk equals the tolerable rate.(2) sample exception rate is less than the expected rate of exception used inplanning the sample.(3) tolerable rate less the allowance for sampling risk exceeds the sample exceptionrate.(4) sample exception rate plus the allowance for sampling risk exceeds the tolerablerate.
An auditor had decided to use probability-proportional-to-size (PPS) sampling, also called dollar-unit or cumulative monetary unit (CMU) sampling, in the audit of the client’s accounts receivable balance. The auditor discovered 3 misstatements while doing their testing. Complete the spreadsheet below and calculate the total projected misstatement.
Which of the following is an advantage of nonstatistical sampling?a. It measures the audit team’s exposure to sampling risk.b. It is required by generally accepted auditing standards.c. It ensures that samples are randomly selected.d. It is typically less complex than statistical sampling
How do bank confirmations differ from positive confirmations ofaccounts receivable? Distinguish between them in terms of the nature of the informationconfirmed, the sample size, and the appropriate action when the confirmation is notreturned after the second request. Explain the rationale for the differences between thesetwo types of confirmations