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
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Question
Chapter 15, Problem 37ICA
a.
To determine
Prepare a non-statistical sampling data sheet for acquisitions.
b.
To determine
Prepare a non-statistical sampling data sheet for cash disbursements.
c.
To determine
Explain the procedures for selecting random numbers in order to conduct sampling tests using excel spreadsheet.
d.
To determine
Complete the sampling data sheet with actual results.
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You and a friend are studying audit sampling together. Your friend is having a hard time understanding the various aspects of risk associated with attribute sampling and has put together the following list of questions she wants to discuss with you. Answer each question.
a. What is:■Audit risk?■Inherent risk?■Control risk?■Controllable risk?■Residual risk?
b. What is sampling risk? How is sampling risk controlled?
c. What are the two aspects of sampling risk that an internal auditor is concerned with when testing controls? Briefly describe each aspect.
d. What is nonsampling risk? How is nonsampling risk controlled?
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?
.Dan and Lily, two audit staff associates are discussing audit sampling while working on the audit of a major client. Dan is explaining to Lily the various audit sampling methods that he has seen being used by audit managers. Dan asks Lily if she has ever heard of the ratio method with respect to evaluating sample results. Lily replies that she has not, so they decide to ask their supervisor, Brad. What would be the best answer from Brad to appropriately answer this question
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
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Similar questions
- 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_forwardThe 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 doarrow_forwardnot use ai please don'tarrow_forward
- 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…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_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
- Monetary unit sampling (MUS) is the most commonly used statistical method of samplingfor tests of details because of its simplicity and its ability to provide statistical resultsin dollars. Read an article titled “Monetary-Unit Sampling Using Microsoft Excel” thatappeared in the May 2005 issue of The CPA Journal (www.nysscpa.org/cpajournal/2005/505/essentials/p36.htm) to answer the following questions.a. The authors suggest that there are three critical steps in applying MUS. What arethese steps?b. How do the authors indicate that an MUS sample size is determined?c. What two factors must be considered when evaluating the results of the sample?arrow_forwardWhen the computed upper exception rate is greater than the tolerable exception rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to justify? Reduce the tolerable exception rate so as to accept the sample results. Expand the sample size and perform more tests. Revise the assessed control risk. Write a letter to management which outlines the control deficiencies.arrow_forwardWhen using test data, why are audit teams required to prepare only one transaction to test each IT control?a. The speed and efficiency of the computer results in reduced sample sizes.b. The risk of misstatement is typically lower in an IT environment.c. Audit teams generally perform more extensive substantive testing in an IT environment, resulting in less need to test processing controls.d. In an IT environment, each transaction is handled in an identical manner.arrow_forward
- Complete 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_forwardThis problem requires the use of ACL software, which is includedin the CD attached to the text. Information about installing and using ACL and solvingthis problem can be found in Appendix, pages 830–834. You should read all of thereference material, especially the material on sampling, to answer questions a. through e.For this problem use the “Inventory” file in the “Inventory_Review” subfolder undertables in Sample_Project. Suggested commands, where applicable, are indicated at the endof the problem requirements.a. Calculate the sample size and sampling interval for an MUS sample based on inventory value at cost (Value). Use a confidence level of 90%, materiality of $40,000,and expected errors of $2,500. (Sampling/Calculate Sample Size; select “monetary”radio button)b. What is the sampling size and sampling interval if you increase materiality to$50,000 and decrease expected errors to $1,000?c. Select the sample based on the sampling interval determined in part a. (Sampling /Sample…arrow_forwardAn auditor typically selects samples when testing controls. What are some factors that affect the sample sizes used when testing controls?arrow_forward
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