AUDITING+ASSURANCE 12MONTH ACCESS CARD
17th Edition
ISBN: 9780135635131
Author: ARENS
Publisher: WILEY
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Chapter 15, Problem 21RQ
To determine
Evaluate the CUER at a 10 percent ARO if four exceptions are found in the sample using statistical attributes sampling. Also, describe the meaning of the statistical results in auditing terms.
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Students have asked these similar questions
Evaluating Results: Classical Variables Sampling. Kyle Berry is using mean-per-unit estimation in the audit of Leonard’s inventory balances. Leonard’s inventory is recorded at $240,000 and comprises 1,200 different items. Berry determined a sample size of 120 items and performed the appropriate substantive procedures. Based on this sample, he determined the following:
Average audited value (per item)
$204
Standard deviation of audited values
$ 22
A summary of some additional parameters estimated by Berry follow:
Tolerable misstatement
$ 17,500
Expected misstatement
$ 7,500
Risk of incorrect acceptance
5%
Risk of incorrect rejection
10%
Required:a. What is Berry’s estimate of the audited value of Leonard’s inventory?b. Calculate the precision and precision interval for Leonard’s inventory. Provide a briefdescription of the meaning of the precision interval.c. What is Berry’s conclusion with respect to Leonard’s inventory balance?d. Using a risk of incorrect…
Identify the factors an auditor uses to decide the appropriateARO. Compare the sample size for an ARO of 10% with that of 5%, all other factorsbeing equal.
In performing a test of controls for ABC, Inc., the auditor wants to know whether Sales order are approved before goods are picked, packed and shipped to customers. The CPAs has stipulated a Tolerable Deviation Rate (TDR) of 8 percent with a Risk of Assessing Control Risk too low of 5 percent. The CPA also anticipates a deviation rate of 2%.
What type of sampling plan should the auditor use for this test?
Attribute sampling
Monetary sampling
Chapter 15 Solutions
AUDITING+ASSURANCE 12MONTH ACCESS CARD
Ch. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Prob. 11RQCh. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - Prob. 14RQCh. 15 - Distinguish between the TER and the CUER. How is...Ch. 15 - Prob. 16RQCh. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Prob. 20RQCh. 15 - Prob. 21RQCh. 15 - Prob. 22RQCh. 15 - Prob. 23.1MCQCh. 15 - Prob. 23.2MCQCh. 15 - Prob. 23.3MCQCh. 15 - Prob. 24.1MCQCh. 15 - Prob. 24.2MCQCh. 15 - Prob. 24.3MCQCh. 15 - Prob. 25.1MCQCh. 15 - Prob. 25.2MCQCh. 15 - Prob. 25.3MCQCh. 15 - Prob. 26.1MCQCh. 15 - Prob. 26.2MCQCh. 15 - Prob. 26.3MCQCh. 15 - Prob. 27DQPCh. 15 - Prob. 28DQPCh. 15 - Prob. 30DQPCh. 15 - Prob. 31DQPCh. 15 - Prob. 32DQPCh. 15 - Prob. 36DQPCh. 15 - Prob. 37DQPCh. 15 - Prob. 38C
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- . STATEMENT 1: Random sampling is a selection method that aims to eliminate bias in the selection process. STATEMENT 2: Assume that the auditor wants to examine 50 sales invoice (sample size) from a population of 2000 sales invoice, the sampling interval using haphazard selection is 40 (2,000/50). A. Only Statement 1 is incorrect B. Only Statement 1 is correct C. Both statements are incorrect D. Both statements are correctarrow_forwardMonetary Unit Sampling with IDEA: Determining Sample Size. Assume that your audit team has established the following parameters for the examination of ELM’s sales transactions: Risk of incorrect acceptance 10% Tolerable misstatement $311,711 (or 8% of the recorded balance of the transactions) Expected misstatement $77,928 (or 2% of the recorded balance of the transactions) Required:a. Use IDEA to determine the necessary sample size, given the above parameters.Parts (b), (c), and (d) are independent scenarios that affect the sample size in this example.b. Assume that your audit team has decided to increase their reliance on internal controland permit a corresponding increase in the risk of incorrect acceptance from 10 percentto 15 percent, which maintains overall audit risk at the same level. What is the necessarysample size, holding all other factors constant?c. Assume that your audit team has decided to reduce the level of tolerable misstatementfrom $311,711 to $233,783 (or…arrow_forwardIndicate 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.arrow_forward
- The accounting department of the client reports that the balance of Accounts Receivable is $210,000. Using classical variable sampling, the auditor computes an estimated total population value of $216,500 and computed a 95% achieved allowance for sampling risk of +- $8,500. The auditor should conclude that the accounts receivable balance is fairly stated. on Select one: O a. False Ob. True Iarrow_forwardAn auditor is determining the appropriate sample size for testing inventory valuation using MUS The population has 3,140 inventory items valued at Calculate the preliminary sample size. Select the formula, then enter the amounts and calculate the sample size. (Abbreviation used TM tolerable misstatement Enter amounts in the for (Click the icon to view the table for determining the confidence factor) Confidence Factor 4.33 TM as Percentage of Population Value 39.75 ECCEED Sample Sizearrow_forwardSample Size Determination. Jule Phillips is examining the internal control of CowboyCompany and has identified the mathematical verification of sales invoices as an importantcontrol and decided to test this control. Based on a discussion with Cowboy’s management,Phillips determined that Cowboy Company’s employees were required to indicate their compliance with this control by writing their initials in an appropriate place on the invoice copy.Assume that Phillips established an acceptable risk of overreliance of 5 percent, anexpected population deviation rate of 3 percent, and a tolerable rate of deviation of 9 percent.Required:a. Using AICPA sample size tables, determine the appropriate sample size.b. Indicate how Phillips would assess the three parameters that are used to determine sample size (risk of overreliance, expected population deviation rate, and tolerable rate ofdeviation).c. Use the original parameters but now assume that Phillips is willing to increase the acceptable risk…arrow_forward
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