Jason and Marco are working on the audit of Jackson Enterprises, Inc., a large national retailer of fireworks and other pyrotechnic products. Jason, an audit intern has been learning about audit sampling techniques, in particular probability-proportionate-to-size sampling. Marco asks Jason how auditors using this sampling method determine the risk of incorrect rejection. What should Jason's response be to this? When using this particular sampling method, the auditors typically do not concern themselves with the risk of incorrect rejection, as this sampling method tests the entire population. When using this sampling method, the auditors specify the risk of incorrect rejection as the assessed level of audit risk multiplied by the determined level of inherent risk. When it comes to probability-proportionate-to-size sampling, the auditors do not specify a risk of incorrect rejection; rather auditors control this risk indirectly. O When it comes to probability-proportionate-to-size sampling, the auditors specify a precise risk of incorrect rejection, and use assessed risk of material misstatement to adjust it accordingly.

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Jason and Marco are working on the audit of Jackson Enterprises, Inc., a large national retailer of fireworks and other pyrotechnic
products. Jason, an audit intern has been learning about audit sampling techniques, in particular probability-proportionate-to-size
sampling. Marco asks Jason how auditors using this sampling method determine the risk of incorrect rejection. What should Jason's
response be to this?
When using this particular sampling method, the auditors typically do not concern themselves with the risk of incorrect
rejection, as this sampling method tests the entire population.
When using this sampling method, the auditors specify the risk of incorrect rejection as the assessed level of audit risk
multiplied by the determined level of inherent risk.
When it comes to probability-proportionate-to-size sampling, the auditors do not specify a risk of incorrect rejection; rather
auditors control this risk indirectly.
O When it comes to probability-proportionate-to-size sampling, the auditors specify a precise risk of incorrect rejection, and
use assessed risk of material misstatement to adjust it accordingly.
Transcribed Image Text:Jason and Marco are working on the audit of Jackson Enterprises, Inc., a large national retailer of fireworks and other pyrotechnic products. Jason, an audit intern has been learning about audit sampling techniques, in particular probability-proportionate-to-size sampling. Marco asks Jason how auditors using this sampling method determine the risk of incorrect rejection. What should Jason's response be to this? When using this particular sampling method, the auditors typically do not concern themselves with the risk of incorrect rejection, as this sampling method tests the entire population. When using this sampling method, the auditors specify the risk of incorrect rejection as the assessed level of audit risk multiplied by the determined level of inherent risk. When it comes to probability-proportionate-to-size sampling, the auditors do not specify a risk of incorrect rejection; rather auditors control this risk indirectly. O When it comes to probability-proportionate-to-size sampling, the auditors specify a precise risk of incorrect rejection, and use assessed risk of material misstatement to adjust it accordingly.
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