Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
10th Edition
ISBN: 9780077732509
Author: William F Messier Jr, Steven M. Glover Associate Professor, Douglas F. Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 8.15MCQ
To determine
Introduction:
Tolerable Deviation Rate is defined as the maximum rate of acceptability of misstatement. It is the maximum possible variance accepted in audit sampling in order to rely upon a specific control.
Upper Deviation Rate is defined as sample deviation rate and an appropriate allowance for sampling risks.If the upper deviation limit is less than or equal to the tolerable rate, the sample results support reliance on the control procedures tested.
In this case, tolerable deviation rate i.e., 7% which is lower than upper deviation rate of 8% which clearly shows controls is ineffective. Auditor cannot rely on the entity’s internal controls.
To describe: Relationship between tolerable rate and upper deviation rate.
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Multiple Choice
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expected population deviation rate (7 percent) was more than the
percentage of errors in the sample (3½ percent).
expected population deviation rate (2½ percent) was less than the
tolerable deviation rate (7 percent).
tolerable deviation rate (7 percent) was less than the computed upper…
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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!
Chapter 8 Solutions
Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
Ch. 8 - Prob. 8.1RQCh. 8 - Prob. 8.2RQCh. 8 - Prob. 8.3RQCh. 8 - Prob. 8.4RQCh. 8 - Prob. 8.5RQCh. 8 - Prob. 8.6RQCh. 8 - Prob. 8.7RQCh. 8 - Prob. 8.8RQCh. 8 - Prob. 8.9RQCh. 8 - Prob. 8.10RQ
Ch. 8 - Prob. 8.11MCQCh. 8 - Prob. 8.12MCQCh. 8 - Prob. 8.13MCQCh. 8 - Prob. 8.14MCQCh. 8 - Prob. 8.15MCQCh. 8 - Prob. 8.16MCQCh. 8 - Prob. 8.17MCQCh. 8 - Prob. 8.18MCQCh. 8 - Prob. 8.19MCQCh. 8 - Prob. 8.20MCQCh. 8 - Prob. 8.21PCh. 8 - Prob. 8.22PCh. 8 - Prob. 8.23PCh. 8 - Prob. 8.24PCh. 8 - Prob. 8.25PCh. 8 - Prob. 8.26PCh. 8 - Prob. 8.27PCh. 8 - Prob. 8.28PCh. 8 - Prob. 8.29PCh. 8 - Prob. 8.30PCh. 8 - Prob. 8.31P
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