STATEMENT 1: Nonstatistical sampling approach is determined based on pure judgment of the auditor. STATEMENT 2: The maximum rate of deviation that would support the auditor's planned assessed level of control risk is the expected error rate. A. Only Statement 1 is incorrect B. Only Statement 1 is correct

STATEMENT 1: Nonstatistical sampling approach is determined based on pure judgment of the auditor. STATEMENT 2: The maximum rate of deviation that would support the auditor's planned assessed level of control risk is the expected error rate. A. Only Statement 1 is incorrect B. Only Statement 1 is correct

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: The auditor attempts to correct for the risk of under-auditing (ineffectiveness) and over-auditing…

A: Auditing is the process of examining financial statements, records, and other financial information…

Q: What is the risk caused by the sample taken by the Auditor that does not describe the…

A: Audit sampling is the audit procedure in which sample is selected to test the whole data or…

Q: Which of the following increase control risk?

A: The answer for the multiple choice question and relevant explanation are presented hereunder : What…

Q: Monetary Unit and Classical Variables Sampling. Indicate whether each of the following…

A: Definition:

Q: tement (M)? a. M is based on the sample results. b. the larger M is, the lower the…

A: Tolerable Error Rate (TER) is the maximum acceptable rate of error sample results. TER = EPER + An…

Q: Ordinarily, risk assessment procedures do not involve the use of audit sampling. However, the…

A: The purpose of audit risk assessment is to gain a better understanding of Organisation and its…

Q: 7. Auditors use sampling in performing tests of controls and ______________ Question 7…

A: In audit sampling, the auditor tests all the data on sample basis. The analytical audit procedures…

Q: Which of the following regarding the level of materiality is correct? Select one: a. An increase in…

A: Materiality is a concept used in auditing to determine the significance or importance of an item or…

Q: s1: The only way to know with certainty whether a sample Is representative is to subsequently audit…

A: Option (c) is the correct answer i.e. s1 and s2 are true

Q: STATEMENT 1: In an audit sampling application, detection risk arises from the uncertainties of…

A: Audit sampling is a process or procedure in which a sample of items are selected from the total…

Q: Andit sampling involves applying an audit procedure to less than 100 percent of the population for…

A: (a) Audit sampling is an audit technique which is used to provide supporting evidence to form an…

Q: For a particular account balance assertion, the auditor is most likely to be able to avoid…

A: Auditors utilize tests of details to gather proof that the balances, disclosures, and underlying…

Q: An auditor who uses statistical sampling for attributes in testing internal controlsshould reduce…

A: Sampling: Sampling can be defined as the process under which small number of observations is taken…

Q: STATEMENT 1: All auditing procedures involves audit sampling. STATEMENT 2: Sufficiency or adequacy…

A: Answer: Concept: Audit sampling is done in audit so that maximum testing are covered.

Q: Select the necessary words from the list of possibilities to complete the following statements. 1. 2…

A: Since you have posted a question with multiple sub-parts, we will do the first three for you. To get…

Question

**Statement 1**: Nonstatistical sampling approach is determined based on pure judgment of the auditor.

**Statement 2**: The maximum rate of deviation that would support the auditor’s planned assessed level of control risk is the expected error rate.

Options:

A. Only Statement 1 is incorrect

B. Only Statement 1 is correct

C. Both statements are incorrect

D. Both statements are correct

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

What are the risks if the auditor concludes controls are operating effectively based on the sample and Control Risk is set too low?
The audit team will choose to reduce the reliance on controls if the _____ is greater than the _____a. Tolerable rate of deviation; upper limit rate of deviation.b. Upper limit rate of deviation; tolerable rate of deviation.c. Expected population deviation rate; tolerable rate of deviation.d. Tolerable rate of deviation; expected population deviation rate.
An essential step in difference estimation is the comparisonof each computed confidence limit with tolerable misstatement. Why is this step soimportant, and what should the auditor do if one of the confidence limits is larger thanthe tolerable misstatement?
STATEMENT 1: The concept of audit sampling serves to discourage auditors from overauditing or underauditing the client's financial statements. STATEMENT 2: When performing tests of controls and substantive tests of details, the auditor is not required to examine all documentary evidence available. A. Only Statement 1 is incorrect B. Only Statement 1 is correct C. Both statements are incorrect D. Both statements are correct
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 client
The more assurance the auditor wants, _______. A. the less representative a sample should be of the population, and the more testing the auditor needs to do B. the more representative a sample should be of the population, but the less testing the auditor needs to do to gain efficiency C. the more representative a sample should be of the population, and the more testing the auditor needs to do D. the less representative a sample should be of the population, and the less testing the auditor needs to do
S1: Stratification in audit sampling enables the auditor to direct his efforts towards the items he considers would potentially contain the greater monetary error. S2: When performing substantive procedures, an account balance or class of transactions is often stratified by monetary value. a. BOTH STATEMENTS ARE TRUE b. BOTH STATEMENTS ARE FALSE c. ONLY S1 IS TRUE d. ONLY S2 IS TRUE
When an auditor decreases the planned assessed level of control risk because certain control procedures were determined to be more effective than anticipated, the auditor would most likely increase the: a. Extent of tests of details. b. Level of inherent risk. c. Extent of tests of controls. d. Level of detection risk.
On the basis of audit evidence gathered and evaluated, an auditor decides to decrease the level of detection risk from that originally planned. Assuming the same planned audit risk level, the change in the planned detection risk most likely resulted from a[n) A. Increase in the assessed control risk B.Increase in materiality levels. C. Decrease in the assessed inherent risk D.Decrease in the assessed citrol risk.
7) In an environment that is highly automated an auditor determines that it is not possible to reduce detection risk solely by using substantive test of transactions. Under these circumstances the auditor most likely would: Perform test of controls to support a lower level of assessed risk. Increase sample size to reduce sampling risk and detection risk. Adjust the materiality level and consider the effect on inherent risk Apply analytical procedures and consider the effect on control risk
In audit sampling applications, sampling risk isa. A characteristic of statistical sampling applications but not of nonstatistical applications.b. The probability that the audit team will fail to recognize erroneous accounting in the client’sdocumentation.c. The probability that accounting misstatements will arise in transactions and enter theaccounting system.d. The probability that an audit team’s conclusion based on a sample might be differentfrom the conclusion based on an audit of the entire population.
The two types of sampling risks 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?