Which of the following is not compatible with a high level of inherent and control risk? detection risk is low. a larger sample should be used. substantive procedures are less effective. year end tests are preferable.
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Which of the following is not compatible with a high level of inherent and control risk?
detection risk is low.
a larger sample should be used.
substantive procedures are less effective.
year end tests are preferable.
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Solved in 3 steps
- 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? Reduce the tolerable exception rate so as to accept the sample results. Expand the sample size and perform more tests. Revise the assessed control risk. Write a letter to management which outlines the control deficiencies.Which of the following would not result in the audit team’s selecting a larger sample of controlsfor examination?a. A reduction in the risk of overreliance from 10 percent to 5 percent.b. An increase in the tolerable rate of deviation from 3 percent to 6 percent.c. An increase in the expected population deviation rate from 2 percent to 4 percent.d. All of the above would result in a larger sample of controlsFor both tests of controls and substantive tests of details, non-sampling risk can be reduced by increasing sample size, while sampling risk can be reduced by proper engagement planning supervision and review. TRUE OR FALSE? WHY?
- Which of the following increase control risk? Select which two options are correct. Select one or more: A. Lack of segregation of duties B. Reduction in sample size for substantive tests C. Optimistic forecasts presented to analysts D. Reduction in the size of the internal audit groupIn an environment that is highly automated, an auditor determines that it is not possible toreduce detection risk solely by using substantive tests of transactions. Under these circumstances, the auditor most likely woulda. Perform tests of controls to support a lower level of assessed control risk.b. Increase the sample size to reduce sampling risk and detection risk.c. Adjust the materiality level and consider the effect on inherent risk.d. Apply analytical procedures and consider the effect on control riskAs the acceptable level of detection risk decreases, an auditor may: A. reduce substantive testing by rrelying on the assessment of inherent risk and control risk. B. postpone the planned timing of substantive tests from interim dates to the year-end. C.Eliminate the assessed level of inherent risk from consideration as a planning factor. D. lower the assessed level of control risk
- What are the risks if the auditor concludes controls are operating effectively based on the sample and Control Risk is set too low?As the acceptable level of detection risk decreases, an auditor may change the a. Timing of substantive tests by performing them at an interim date rather than at year-end. b. Assessed level of control risk. c. Timing of tests of controls by performing them at several dates rather than at one time. d. Assessed level of inherent risk to a higher amount. e. Nature of substantive procedures from a less effective to a more effective procedure.When the auditor has assessed control risk of a particular area at a reduced level, he or she will then Select one: a. eliminate the need to gather evidence in that area. b. test the effectiveness of the controls in that area. c. proceed to expand the sample sizes in that area. d. negotiate with management to determine which controls will be tested in that area.
- Auditors must be aware of sampling risks because: A The risk of type 2 error due to increased sampling might be avoided by increasing tests of controlsB The risk of a type 2 error is that decreased sampling might be avoided by increasing the materiality thresholdC The risk of a type 1 error due to decreased sampling might be avoided by reducing the substantive testsD The risk of a type 2 error is that a decreased sample might have a greater impact on audit costsE The risk with a type 1 error is that increased sampling will not have a greater impact on the auditor's opinionExplain how the following test of control will affect the sample size? a. An increase in the extent to which the auditor's risk assessment takes into account relevant controls b. An increase in the tolerable rate of deviation c. An increase in the expected rate of deviation of the population to be testedWhen the auditors have chosen to test a control, what relationship will the tolerable rate normally have when compared to the expected rate of deviations in the sample? Multiple Choice Exceed. Equal. Be less than. A Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.