Mason Rowe is testing the effectiveness of an important control for Hart Inc. Rowe is placing a high level of reliance on this control and has assessed a relatively low risk of assessing control risk too low (5 percent) and tolerable rate of deviation (6 percent). Based on the acceptable risk of overreliance, expected population deviation rate, and tolerable rate of deviation, Rowe determined a sample size of 60 items. The tests of controls revealed three deviations.
Required:
Mason Rowe is testing the effectiveness of an important control for Hart Inc. Rowe is placing...
A. Mason Rowe is testing the effectiveness of an important control for Hart Inc. Rowe is placing a high level of reliance on this control and has assessed a relatively low risk of assessing control risk too low (5 percent) and tolerable rate of deviation (6 percent). Based on the acceptable risk of overreliance, expected population deviation rate, and tolerable rate of deviation, Rowe determined a sample size of 60 items. The tests of controls revealed three deviations. Required: Calculate...
You have been asked to test the effectiveness of Ingo Corporation’s control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 8 percent (although she expects the rate to be only approximately 1.75 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed...
15 You have been asked to test the effectiveness of Ingo Corporation's control of manually approving all purchases over $25.000 During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jan Zhang, CPA, your supervisor asked you to use a tolerable deviation rate of 5 percent (although she expects the rate to be only approximately 0.50 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned...
. Assume that the tolerable deviation rate is 12%. For each of the items (a) through (d) state the upper Limit of Deviations and include the appropriate conclusion as to whether the control is operating effectively. Risk of Over Reliance Sample Size Number of Deviations Upper Limit of Deviations? Control Operating? (yes or no) a. 5% 20 0 b. 5% 75 5 c. 10% 75 5 d. 10% 150 10
Chapter 9 Audit Sampling 1.Three factors that determine the sample size are the risk of assessing control risk too high, tolerable deviation rate, and the expected population deviation rate. a. True b.False 2.While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. It was, in fact, not materially misstated. This situation illustrates the risk of a. Incorrect rejection b. Incorrect acceptance c....
Ira Icandoit is a staff auditor in the internal audit function of a small manufacturing company located in western Kansas. Ira recently completed a professional development course on a statistical sampling and is very excited about the new knowledge he has gained. He decided to apply his newly gained knowledge during the audit to which he had just been assigned. He used attribute sampling when he performed his tests of controls over the company’s procurement transactions. Ira figured that a...
Ira Icandoit is a staff auditor in the internal audit function of a small manufacturing company located in western Kansas. Ira recently completed a professional development course on a statistical sampling and is very excited about the new knowledge he has gained. He decided to apply his newly gained knowledge during the audit to which he had just been assigned. He used attribute sampling when he performed his tests of controls over the company’s procurement transactions. Ira figured that a...
For each item, select the proper statistical term. Terms are only used once and each item has only one correct answer. - A. B. C. D. E. F. G. H. I. J. K. L. M. N. O. P. Hanna, CPA, identified the item in which...
11A–1.A summary of the controls for the revenue and cash receipts cycle of Keystone Computers & Networks, Inc., appears in this appendix.For the following three controls over sales, indicate one type of error or fraud that the control serves to prevent or detect. Organize your solution as follows:ControlError or Fraud ControlledApplication controls are applied when customer orders are entered by the sales order clerk.The computer assigns numbers to sales invoices when they are prepared.Monthly statements are mailed to customers.For the...
1. Consider the following statements: I. Per COSO, Control Activities are the policies and procedures that help insure that management’s directives are carried out. II. A Reliance Strategy is used when control risk is considered High. a. I is true; II is true b. I is true; II is false c. I is false; II is true d. I is false; II is false 2. Management's attitude toward aggressive financial reporting and its...