AUDITING+ASSURANCE 12MONTH ACCESS CARD
17th Edition
ISBN: 9780135635131
Author: ARENS
Publisher: WILEY
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Chapter 17, Problem 31DQP
To determine
Determine
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Blake and Caroline, two audit managers assigned to the audit of Legolas Enterprises are discussing samples and sample sizes in conjunction with the
audit of the client's system of internal control. Blake mentions that back in college when he took an auditing class, he recalled the professor saying
that audit sample size was tied to the level of assurance that the auditor ultimately wished to obtain. Which of the following responses by Caroline is
most likely to help Blake understand this connection?
O The professor was mistaken. There really isn't any relationship between the level of assurance the auditor wishes to obtain and the sample sizes used in an audit.
O Although there is a definite relationship between desired level of assurance and sample size, most auditors simply audit the population of interest when they wish to
increase the desired level of assurance.
O Generally speaking, if an auditor wishes to increase the desired level of assurance, he or she will typically increase…
Nazril is a new audit trainee at Faezi & Co. In assisting the audit seniors to undertake the audit work, the audit seniors always advise her to properly maintain all the working papers. From there on, whenever she does any audit work, she will make sure all information is properly documented and properly kept in a proper file.
In practice, there are several audit sampling techniques that are associated with either the non-statistical or statistical sampling approaches. Clarify which is and briefly explain the differences between statistical and non-statistical sampling approach.
General Sampling. The accounting firm of Mason & Jarr performed the work described ineach of the following separate cases. The two partners are worried about properly applyingauditing standards regarding sampling. They have asked your advice.Required:Write a report addressed to Mason & Jarr stating whether they did or did not observe theessential elements of auditing standards in each case. When applicable, refer to the appropriate professional standards regarding audit sampling.a. Mason selected three purchase orders for the purchase of raw materials from LIZ Corporation’s files. He started at the beginning in the accounting process and traced each onethrough the accounting system. He saw the receiving reports, purchasing agent’s approvals, receiving clerks’ approvals, vendors’ invoices (now stamped PAID), entry in the cashdisbursement records, and canceled checks. This work gave him a first-hand familiaritywith the cash disbursement system, and he felt confident about…
Chapter 17 Solutions
AUDITING+ASSURANCE 12MONTH ACCESS CARD
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
Ch. 17 - Prob. 11RQCh. 17 - Prob. 12RQCh. 17 - Prob. 13RQCh. 17 - Prob. 14RQCh. 17 - Prob. 15RQCh. 17 - Prob. 16RQCh. 17 - Prob. 17RQCh. 17 - Prob. 18RQCh. 17 - Prob. 19RQCh. 17 - Prob. 20RQCh. 17 - Prob. 21.1MCQCh. 17 - Prob. 21.2MCQCh. 17 - Prob. 21.3MCQCh. 17 - Prob. 22.1MCQCh. 17 - Prob. 22.2MCQCh. 17 - Prob. 22.3MCQCh. 17 - Prob. 23.1MCQCh. 17 - Prob. 23.2MCQCh. 17 - Prob. 23.3MCQCh. 17 - Prob. 24.1MCQCh. 17 - Prob. 24.2MCQCh. 17 - Prob. 24.3MCQCh. 17 - Prob. 25DQPCh. 17 - Prob. 26DQPCh. 17 - Prob. 27DQPCh. 17 - Prob. 28DQPCh. 17 - Prob. 29DQPCh. 17 - Prob. 30DQPCh. 17 - Prob. 31DQPCh. 17 - Prob. 32DQPCh. 17 - Prob. 34DQPCh. 17 - Prob. 35DQP
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- General Attributes Sampling. You overheard the following dialogue between Joe Ashley(a staff assistant) and Monique Estrada (his supervisor).Required:Referring to appropriate professional standards, comment on each of these statements.a. “It’s unfortunate that generally accepted auditing standards don’t allow us to use nonstatistical sampling for this control. I just don’t feel that the extra time and effort to usestatistical sampling are worth the benefits.”b. “I’m not sure what level of control risk we should plan to use. We need to determinethe amount of substantive procedures that we will conduct and then assess control riskaccordingly.”c. “We really need to be careful to limit our exposure to the risk of overreliance. This riskcould result in our failure to perform enough substantive procedures.”d. “Separation of duties is such an important control that we should use statistical samplingto evaluate the extent to which the custody, recording, and approval functions for purchases…arrow_forwardStatistical sampling and use of computer-assisted audit techniques (CAATs) are important to the IS audit for evidence gathering. Answer one of the following questions: Explain the difference between statistical and non-statistical approaches to sampling. What do you think is most commonly used by auditors? Do you think the selection is situational-dependent?arrow_forwardEvan Kristopher, CPA intends to use probability-proportional-to-size sampling. He has properly selected and audited a sample of 100 accounts receivable from his client’s population of 3,000 accounts. He calculated a sampling interval of $6,000 and the tolerable misstatement for the account is $30,000. Evan also recalls that “basic precision” is equal to the appropriate reliability factor multiplied times the sampling interval. He wishes to accept a risk of incorrect acceptance of 10%. He found that 97 of the 100 accounts in the sample were properly calculated. However, the following three errors existed: Book Value Audited Value $75 $70 1,000 750 9,300 6,720 Required: Calculate the projected misstatement. Calculate the basic precision. Calculate the incremental allowance. Calculate the upper limit on misstatement. What would the auditors’ conclusion be for the population based on the analysis? explain pleasearrow_forward
- Sample 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_forwardIn auditing, can anyone who uses sampling such as statistical and non-statistical sampling be absolutely sure that the sample is representative of the population from which it is drawn? Please provide references if any.arrow_forwardComplete the statement. The lower the risk of material misstatement, a. the greater the maximum tolerable misstatement b. the higher the audit risk required. c. the later in the year that principal audit test procedures are performed d. the smaller the sample size needed for substantive testingarrow_forward
- 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.arrow_forwardWhen 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.arrow_forwardComprehensive Attributes Sampling. Audra Dodge, CPA, is performing an attributessampling plan for her audit of Truck Company. In her audit of cash disbursements, she hasidentified preparing a voucher and marking it as “paid” prior to preparing and mailing acheck to the vendor as an important control. Dodge defined any voucher that was not markedas “paid” as being a deviation. In performing her sampling application, she established the following parameters:Risk of overreliance 5%Expected population deviation rate 1.5%Tolerable rate of deviation 4%Required:a. Identify what factors Dodge considered in establishing the risk of overreliance, expectedpopulation deviation rate, and tolerable rate of deviation.b. Assume that Dodge wished to place additional reliance on this control. How would thataffect the three parameters in part (a)?c. Based on the original parameters, use AICPA sample size tables to determine the appropriate sample size.d. If Dodge selected the sample size in part (c) and…arrow_forward
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