Auditing and Assurance Services, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134075754
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 33DQP
a.
To determine
State the way Person A should interpret CUER 7.92%
b.
To determine
State the reason for making the Person A to conclude about the effectiveness of the control based on one attribute deviation.
c.
To determine
Provide the alternatives to be used by Person A to determine that control cannot be relied.
d.
To determine
State whether the information gathered from the controller will be helpful for Person A to ascertain the information will be more relevant for discussing the alternatives in the requirement c and also explain the type of testing and documentation that would be used in order to conclude that the control can be relied upon.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Evan 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 please
Evan 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?
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.
Chapter 15 Solutions
Auditing and Assurance Services, Student Value Edition (16th Edition)
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 - Distinguish between the TER and the CUER. How is...Ch. 15 - Prob. 15RQCh. 15 - Prob. 16RQCh. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Prob. 20RQCh. 15 - Prob. 21RQCh. 15 - Prob. 22.1MCQCh. 15 - Prob. 22.2MCQCh. 15 - Prob. 22.3MCQCh. 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. 27DQPCh. 15 - Lenter Supply Company is a medium-sized...Ch. 15 - Prob. 29DQPCh. 15 - Prob. 30DQPCh. 15 - Prob. 31DQPCh. 15 - Prob. 32DQPCh. 15 - Prob. 33DQPCh. 15 - Prob. 34DQPCh. 15 - Prob. 35DQPCh. 15 - Prob. 36CCh. 15 - Prob. 37ICA
Knowledge Booster
Similar questions
- Monetary Unit Sampling. Georgie Costanza, CPA, is auditing the accounts receivable of Vandalay Industries and is considering the use of MUS techniques. Costanza has a number of questions regarding the use of MUS and has asked you to provide answers to them. Required:a. Under generally accepted auditing standards, can Costanza use nonstatistical sampling inthe examination of Vandalay accounts receivable?b. What are the advantages to using statistical sampling in the audit?c. What are the risks associated with sampling, and to what type of losses do they exposeCostanza?d. How does Costanza establish the appropriate level of the risk of incorrect acceptance?e. Is Costanza permitted to specify that certain items be examined, or do all items need tobe randomly selected?f. How can Costanza increase the likelihood that the items in the sample are representativeof the population?g. Other than the dollar amount of the misstatements, are any other factors important forCostanza to consider with…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_forwardAn auditor had decided to use probability-proportional-to-size (PPS) sampling, also called dollar-unit or cumulative monetary unit (CMU) sampling, in the audit of the client’s accounts receivable balance. The auditor discovered 3 misstatements while doing their testing. Complete the spreadsheet below and calculate the total projected misstatement.arrow_forward
- In an MUS sample with a sampling interval of $5,000, an auditor discovered that aselected accounts receivable with a recorded amount of $10,000 had an audit valueof $8,000. If this is the only error discovered by the auditor, the projected error ofthe sample would be(1) $1,000. (3) $4,000.(2) $2,000. (4) $5,000.arrow_forwardThe Burke CPA firm is auditing Cabrera, Inc. The company is a manufacturer. It manufactures rubber ducks and ships them to retailers e.g. Toys R Us. There should be a shipping document to go with every sales invoice. The firm tentatively plans to rely on this internal control procedure. To test this internal control procedure, Burke decides to use attribute sampling. The firm decides, based on last year’s audit, on a 90% confidence level. The firm expects that 2% of the time, this internal control procedure does not operate effectively. The firm sets a tolerable deviation rate of 7%. What is the required sample size?arrow_forwardAn auditor is using PPS Sampling to determine the projected error in Accounts Receivable. Two errors were discovered: Error #1: Book Value of $400, Audit Value of $100 Error #2: Book Value of $6,000, Audit Value of $2,000 The Sampling Interval was $2,000 Total Projected Error is: a. $2,100 b. $2,833 c. $4,300 d. $2,300 e. $5,500arrow_forward
- An auditor is going to choose a sample of accounts receivable balances at year end to test and has determined the appropriate sampling interval to be 4 with a random start of the second balance in the list. Presented below are the first 10 accounts in the list (in order). Determine the first 2 account balances (including the random start) that will be sampled and tested using the sampling interval. Beads Galore $678 Beads N Such $5,125 Island Time Beads $235 Premier Beads $4,020 Regal Beads $567 Seattle Bead Xchange $321 Shipwreck Beads $3,502 The Bead Place $870 The Bead Place Too $450 The Bead Place Too Phoenix $125arrow_forwardThe auditor of Tent manufacturing Ltd has decided to use systematic selection of cash payments when testing the control that cheque payments are supported by a supplier’s invoice, a purchase requisition and a goods received note. Each cheque comprises a sampling unit. There are 4000 cheques drawn (numbered 1–4000) and the total amount of cash payments is $12 million. The sample size is 25 and the random start is 205. Given this information, the second item selected will be item no:Select one:a. Cheque number 2415.b. Cheque number 160.c. Cheque number 365.d. Some other item number.arrow_forwardEvaluating a Sampling Application. Tom Barton, an assistant accountant with a local CPAfirm, recently graduated from Other University. He studied statistical sampling for auditing in college and wants to impress his employers with his knowledge of modern auditingmethods.Barton decided to select a random sample of payroll checks for the test of controls usinga tolerable rate of deviation of 5 percent and an acceptable risk of overreliance of 5 percent. The senior accountant told Barton that 2 percent of the checks audited last year hadone or more errors in the calculation of net pay. He decided to audit 100 random checks.Because supervisory personnel had paychecks with higher amounts than production workers, he selected 60 of the supervisor checks and 40 checks of the others. He was very carefulto see that the selections of 60 from the April payroll register and 40 from the August payrollregister were random.The audit of this sample yielded two deviations, exactly the 2 percent rate…arrow_forward
- The auditor conducted test of details of transaction and audit client's revenue using sampling. There are 100 sales transactions made by the company. Overall of the 100 transactions, according to auditor’s professional judgment, materiality is set at 5% or 5 transactions. The auditor took a sample of 20 transactions, and it turns out that of the 20 transactions examined, there were 2 misstatement found. Based on the results of the sampling inspection, the auditor concluded that there was 2 out of 20 means 10%, and judge this finding as material misstatement. When in fact, overall of the 100 transactions there were only that 2 transactions occurred irregularities or errors that accidentally that two were chosen on 20 random sampling. What we called the risk involved in this case example? Explain your answer specifically!arrow_forwardGeneral Attributes Sampling. Frazier Holyfield, a new staff accountant, is evaluatingimportant controls over the revenue cycle and, more specifically, assessing the operatingeffectiveness of the control that all shipments made to customers by Top Rank Inc. havebeen properly invoiced.Required:Comment on the following actions that Holyfield performed. You should evaluate eachaction independently of any other actions.a. Holyfield decided to inspect documentary evidence that all shipments made by Top Rankhave been invoiced by matching shipping documents with invoices. Accordingly, shehas identified the population from which she intends to sample as all sales invoices. TopRank has a computerized list of invoiced sales that she can use to select the appropriatesample.b. Because Holyfield plans to place a high degree of reliance on this particular control, sheassesses the risk of overreliance at 5 percent. In previous years, a 10 percent level wasused, but consultation with the engagement…arrow_forwardJason 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…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Essentials Of Business AnalyticsStatisticsISBN:9781285187273Author:Camm, Jeff.Publisher:Cengage Learning,
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Essentials Of Business Analytics
Statistics
ISBN:9781285187273
Author:Camm, Jeff.
Publisher:Cengage Learning,
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub