Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Question
Chapter 8, Problem 61RSCQ
To determine
Introduction: Tolerable limit is the threshold value of the quantity. It acts like a barrier. Total estimated misstatement is the final estimate of the audit without any risk.
To state : Judgment for the given scenarios where total estimated value is very close to tolerable limits value and explain about the course of actions.
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Students have asked these similar questions
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?
Other factors equal when planning a monetary unit sample, which of the following is true regarding the maximum tolerable misstatement (M)?
a.
M is based on the sample results.
b.
the larger M is, the lower the confidence.
c.
the larger M is, the smaller the sample.
d.
the larger the expected misstatement, the smaller M is.
Which one of the sentences below is FALSE?
A.
The risk of incorrect acceptance called beta risk has the consequence that the auditor may assume that the population is free of material misstatement.
B.
The risk of incorrect rejection is called alpha risk and has the consequence that the auditor may assume on the basis of sample results that a population is materially misstated when, in fact, it is not .
C.
The risk of incorrect acceptance is called beta risk.
D.
The risk of incorrect rejection very common in audit sampling is called beta risk.
Chapter 8 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 8 - Prob. 1TFQCh. 8 - Prob. 2TFQCh. 8 - Prob. 3TFQCh. 8 - Prob. 4TFQCh. 8 - Prob. 5TFQCh. 8 - Prob. 6TFQCh. 8 - Prob. 7TFQCh. 8 - Prob. 8TFQCh. 8 - Prob. 9TFQCh. 8 - Prob. 10TFQ
Ch. 8 - Prob. 11TFQCh. 8 - Prob. 12TFQCh. 8 - Prob. 13TFQCh. 8 - Prob. 14TFQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Prob. 18MCQCh. 8 - Prob. 19MCQCh. 8 - Prob. 20MCQCh. 8 - Prob. 21MCQCh. 8 - Refer to Exhibit 8.6. Assume a 5% risk of...Ch. 8 - Prob. 23MCQCh. 8 - Prob. 24MCQCh. 8 - Prob. 25MCQCh. 8 - Prob. 26MCQCh. 8 - Prob. 27MCQCh. 8 - Prob. 28MCQCh. 8 - Prob. 29RSCQCh. 8 - Prob. 30RSCQCh. 8 - Prob. 31RSCQCh. 8 - Prob. 32RSCQCh. 8 - Prob. 33RSCQCh. 8 - Prob. 34RSCQCh. 8 - Prob. 35RSCQCh. 8 - Prob. 36RSCQCh. 8 - Prob. 37RSCQCh. 8 - Prob. 38RSCQCh. 8 - Prob. 39RSCQCh. 8 - Prob. 40RSCQCh. 8 - Prob. 41RSCQCh. 8 - Prob. 42RSCQCh. 8 - Prob. 43RSCQCh. 8 - Prob. 44RSCQCh. 8 - Prob. 45RSCQCh. 8 - Prob. 46RSCQCh. 8 - Prob. 47RSCQCh. 8 - What is stratification? Distinguish between...Ch. 8 - Prob. 49RSCQCh. 8 - Prob. 50RSCQCh. 8 - Prob. 51RSCQCh. 8 - Prob. 52RSCQCh. 8 - Prob. 53RSCQCh. 8 - Prob. 54RSCQCh. 8 - Prob. 55RSCQCh. 8 - Prob. 56RSCQCh. 8 - Prob. 57RSCQCh. 8 - Prob. 58RSCQCh. 8 - Prob. 59RSCQCh. 8 - Prob. 60RSCQCh. 8 - Prob. 61RSCQCh. 8 - Prob. 62RSCQCh. 8 - Prob. 63RSCQ
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Similar questions
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- K Conduct a test at the α = 0.05 level of significance by determining (a) the null and alternative hypotheses, (b) the test statistic, and (c) the P-value. Assume the samples were obtained independently from a large population using simple random sampling. Test whether p₁> P2. The sample data are x₁ = 116, n₁ = 244, x2 = 132, and n₂ = 313. (a) Choose the correct null and alternative hypotheses below. OA. Ho P1 P2 versus H₁: P1 P2 OB. Ho P₁ P2 versus H₁: P₁ P2 OD. Ho p₁ =0 versus H₁:.p₁ #0 (b) Determine the test statistic. Zo= (Round to two decimal places as needed.) (c) Determine the P-value. The P-value is (Round to three decimal places as needed.) What is the result of this hypothesis test? OA. Do not reject the null hypothesis because there is not sufficient evidence to conclude that p₁ #p2- OB. Do not reject the null hypothesis because there is not sufficient evidence to conclude that p₁ P2- OD. Reject the null hypothesis because there is sufficient evidence to conclude that p₁…arrow_forward1. Which of the following would be designed to estimate a numerical measurement of a population, such as monetary value?* A. Sampling for variables B. Sampling for attributes C. Sequential sampling D. Discovery sampling E. None of themarrow_forward1 Which of the following statements is NOT a characteristie of quantitative research? A. The results taken from a sample can be generalized to the population. B It delivers an in-depth understanding of the problem or study C. It provides a more credible and reliable result. D. Statistical analysis of numerical data. 2. Which statement below illustrates a weakness of quantitative research? A. The responses of the participants are limited to what has been asked and the choices given. B. The researcher's perspective can influence interpretation of results. C. Data gathering takes too much time. D. Low degree of subjectivity 3. Which of the following statements is NOT true about the importance of Quantitative Research? A. helps educators identify ways to improve learming. B. helps improve crop production using safe organic fertilizers. C helns nharmaceutical cnmnanies explore safe and effective medicines D. helps understand victims of domestic violence perception of satisfaction. 4. A…arrow_forward
- The risk that the decision made based on the sample will differ from the decision madebased on the entire population is referred to asa. Audit risk.b. Examination risk.c. Sampling risk.d. Nonsampling riskarrow_forwardWhich of the following steps involved with determining the upper limit on misstatements is ordinarily performed earliest?a. Multiply the sampling interval by the tainting percentage.b. Determine the audited value of the item and compare it to the recorded balance.c. Calculate the basic allowance for sampling risk.d. Calculate the incremental allowance for sampling risk.arrow_forwardYou are testing the null hypothesis that there is no relationship between two variables, X and Y. From your sample of n = 20, you determine that SSR = 80 and SSE 20. Complete parts (a) through (e) below. a. What is the value of FSTAT? State the hypotheses to test. Choose the correct answer below. OA H B₁50 H₁ B₁0 OC. Ho B₁ #0 H₁ = B₁ = 0 = 72 (Round to the nearest integer as needed) FSTAT = b. At the a=0.05 level of significance, what is the critical value? The critical value is 4.41 (Round to two decimal places as needed.) c. Based on your answers to (3) and (b), what statistical decision should you make? A. Reject H. There is no evidence that there is a relationship between X and Y. OB. Do not reject H. There is no evidence that there is a relationship between X and Y. OC. Do not reject H,. There is evidence that there is a relationship between X and Y D. Reject H. There is evidence that there is a relationship between X and Y. d. Compute the correlation coefficient by first…arrow_forward
- The unique feature of monetary unit sampling is thata. Sampling units are not chosen at random.b. A dollar unit selected in a sample is not replaced before the sample selection is completed.c. Auditors need not worry about the risk of incorrect acceptance decision.d. The population is defined as the number of monetary units in an account balance or class of transactions.arrow_forwardIf the _______ exceeds the _______, the audit team would decide to rely on internal control as planned and maintain control risk at planned levels.a. ULRD; tolerable rate of deviation.b. tolerable rate of deviation; ULRD.c. expected population deviation rate; tolerable rate of deviation.d. tolerable rate of deviation; expected population deviation rate.arrow_forwardThe sample size of the test of controls varies directly with: Expected Population Deviation Rate Tolerable Rate Risk of Assessing Control Risk Too Low A. Yes Yes No B. No No Yes C. Yes No No D. No Yes Yes E. Yes Yes Yes A B C D Earrow_forward
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