EBK AUDITING AND ASSURANCE SERVICES
16th Edition
ISBN: 9780134067117
Author: Hogan
Publisher: VST
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Chapter 17, Problem 5RQ
To determine
Explain the statement stated by an auditor "On every aspect of the audit where it is possible, I calculate the point estimate of the misstatements and evaluate whether the amount is material. If it is, I investigate the cause and continue to test the population until I determine whether there is a serious problem. The use of stratified sampling in this manner is a valuable audit tool.”
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Statistical 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?
In auditing, can anyone who uses sampling be absolutely sure that the sample is representative of the population from which it is drawn?
Please provide references if any.
In 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.
Chapter 17 Solutions
EBK AUDITING AND ASSURANCE SERVICES
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. 19.1MCQCh. 17 - Prob. 19.3MCQCh. 17 - Prob. 19.2MCQCh. 17 - Prob. 20.1MCQCh. 17 - Prob. 20.2MCQCh. 17 - Prob. 20.3MCQCh. 17 - Prob. 21.1MCQCh. 17 - Prob. 21.3MCQCh. 17 - Prob. 21.2MCQCh. 17 - Prob. 22.1MCQCh. 17 - Prob. 22.2MCQCh. 17 - Prob. 22.3MCQCh. 17 - Prob. 23DQPCh. 17 - Prob. 24DQPCh. 17 - Prob. 25DQPCh. 17 - Prob. 26DQPCh. 17 - Prob. 27DQPCh. 17 - Prob. 28DQPCh. 17 - Prob. 29DQPCh. 17 - Prob. 30DQPCh. 17 - Prob. 31CCh. 17 - Prob. 32C
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- In non-statistical sampling, _______. the auditor determines samples size, sample selection methods, and evaluates the sample results on the basis of the professional judgment and the auditor’s own experience. the auditor determines samples size, sample selection methods, and evaluates the sample results entirely on the basis of predetermined statistical parameters. the auditor uses the internal audit function to gather samples the auditor selects a sample of certain balance sheet accounts and exclusively audits them If an auditor wishes to draw attention to important information that is already presented or disclosed in the financial statements, the auditor would include a _______. qualified opinion disclaimer of opinion emphasis-of-matter paragraph scope limitation paragraph _______ are used near the end of the audit to assist the auditor in forming an overall conclusion about whether the financial statements…arrow_forwardTRUE OR FALSE When sampling is used by an auditor, an element of uncertainty is present in the auditor's conclusion. When evaluating the results of specific items selected for testing, its effects must be projected to the whole population. In performing external confirmations, the management prepares the requests and receives and replies for communication to the auditor. As the use of going concern assumption is always relevant un audit, the auditor shall evaluate whether uncertainty exists as the company's ability to continue as going concern. Adverse key financial ratios and negative operating cash flows are some events that may cast doubt about the going concern of a company. In searching for unrecorded liabilities, the population of audit interest is the schedule of accounts payable at period end. Audit sampling refers to the application of audit procedures to less than 100% of the items in an account balance or class of transactions for the purpose of…arrow_forwardList and discuss the decisions involving professional judgment that must be made by the CPAs in applying statistical sampling techniques to tests of controls.arrow_forward
- 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.arrow_forward(c)Describe the factors which theauditor should consider whendetermining the size of a sample. (d) Describe to what extent statistical sampling enhances the quality of the audit evidence. (e) Explain how judgementis used in statistical and non-statistical sampling.arrow_forwardSTATEMENT 1: Since audit sampling is an essential part of the audit process, each step in an audit sampling application should be adequately planned. STATEMENT 2: No sampling method can provide the auditor with an absolute assurance that a particular sample is perfectly representative of the population. A. Only Statement 1 is incorrect B. Only Statement 1 is correct C. Both statements are incorrect D. Both statements are correctarrow_forward
- If the auditor concludes that audit sampling has not provided a reasonable basis for conclusions about the population that has been tested, the auditor may practically apply which of the following: i) Request management to investigate misstatements that have been identified and the potential for further misstatements ii) Request management to investigate misstatements that have been identified and to make any necessary adjustments iii) Make another completely new audit sampling for test of details iv) Tailor the nature, timing and extent of further audit procedures to best achieve the required assurance. A. i) , ii ) and iii) B. i ) and iii) C. iii) and iv) D. i, ii and ivarrow_forwardWhat is “tolerable misstatement”? How is this concept applied when auditors perform audit tests on a sample?arrow_forwardAudit sampling involves applying an audit procedure to less than 100 percent of the population for the purpose of evaluating some characteristic of the population. when an auditor uses sampling, an element of uncertainty enters into the auditor’s conclusions.Required:a. Explain the auditor’s justification for accepting the uncertainties that are inherent in the sampling process.b. Discuss the uncertainties that collectively embody the concept of audit risk.c. Discuss the nature of sampling risk and nonsampling risk. Include the effect of sampling risk on tests of controls.arrow_forward
- Risk of incorrect rejection is defined as _______. the risk that the auditor concludes that a material misstatement does not exist when it does exist the risk that the auditor concludes that a material misstatement exists when it does not exist the risk that an auditor incorrectly rejects a client the risk that management may reject the audit opinion issued by the auditor An advantage of statistical sampling _______. is that it allows an auditor to measure control risk is that it allows an auditor to measure sampling risk is that it allows an auditor to measure inherent risk is that it is cheaper to perform, resulting in lower audit fees for the clientarrow_forwards1: The only way to know with certainty whether a sample Is representative is to subsequently audit the entire population. s2: One way to control sampling risk is to increase the sample size. s3: Sampling risk results from the auditor's failure to recognize exceptions in transaction data. A. all statements are true b. all statements are false c. s1 and s2 are true d. s1 and s3 are truearrow_forwardThe two types of sampling risks that auditors face include the risk of incorrect acceptance and the risk of incorrect rejection. What do each of these mean and how will each impact the audit process and the audit results? Which is considered the more important risk?arrow_forward
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