Which of the following situations will result in the auditors concluding that the risk of material misstatement is too high when using non-statistical sampling for substantive tests?
The projected misstatement exceeds the tolerable misstatement.
The allowance for sampling risk exceeds the projected misstatement.
The risk of incorrect acceptance exceeds the risk of incorrect rejection.
The tolerable misstatement exceeds the sample net misstatement.
Ans : A (The Projected misstatement exceeds the tolerable misstatement )
Explanation
Their is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatements is more than the tolerable misstatement.
Which of the following situations will result in the auditors concluding that the risk of material...
When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample? An increase in the tolerable misstatement An increase in the acceptable risk of incorrect acceptance Small expected misstatements A decrease in the tolerable misstatement
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....
Which of the following factors is least likely to influence the auditor’s determination of an appropriate sample size when testing the existence assertion for inventory? Group of answer choices Acceptable risk of incorrect acceptance Anticipated misstatement Tolerable misstatement Allowance for sampling risk Book value of the inventory account
5 The auditors of Landi Corporation wish to use a structured approach to nonstatistical sampling to evaluate the ndihas 12,400 receivable accounts with a total book value of $2,665,000 The auditors have assessed the combined level of inherent and control risk at a moderate level and believe that their other substantive procedures are so limited as to require a "maximum" risk assessment. After considering the overall audit plan, the auditors believe that the test's tolerable misstatement is $61.295. Use Fiqure...
Please answer A, B, C Thanks! only used for Class Discussion Exercise Kayla Reed is using mean-per-unit estimation in the audit of Hamilton's inventory balances. Hamilton's inventory is recorded at $240,000 and comprises 1.200 different items. Reed determined a sample size of 120 items and performed the appropriate substantive procedures and based on this sample, determined the following: Average audited value (per item) Standard deviation of audited values $ 204 $ 22 A summary of some additional parameters estimated by...
Only b and c. Thank you! AP10.8 (LO 8) Evaluating a PPS sample Assume the following misstatements were found in a PPS sample: Sample Item Book Value Audit Value $ 650 540 1,900 2,200 2,800 $ 585 0 0 1,650 2,660 Required a. Calculate the projected misstatement assuming: • The sampling interval was $1,800. The sampling interval was $ 2,000. b. If a risk of incorrect acceptance of 15% is specified in the sample design, the sampling interval is $2,000,...
1. If a risk of incorrect acceptance of 15% is specified in the sample design, the sampling interval is $2,000, and five misstatements are found as enumerated above, calculate: Basic precision. The incremental allowance for sampling risk. The upper misstatement limit. 2. If tolerable misstatement were $50,000 and expected misstatement were $10,000, what conclusion would you reach based on your results in above? AP10.8 (LO 8) Challenging Evaluating a PPS sample Assume the following misstatements were found in a PPS...
4 The following information applies to the questions displayed below) The auditors of Landi Corporation wish to use a structured approach to nonstatistical sampling to evaluate the reasonableness of the accounts receivable. Landi has 12.400 receivable accounts with a total book value of $2,665,000 The auditors have assessed the combined level of inherent and control risk at a moderate level and believe that their other substantive procedures are so limited as to require a "maximum" risk assessment. After considering the...
17 Saved Rachel Robertson wishes to use mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Smith, Inc. Smith has 10,800 receivable accounts with a total book value of $1,575,000. Robertson estimates the population's standard deviation to be equal to $21. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $69,000, and that a risk of incorrect rejection of 10 percent and a risk of incorrect acceptance of...
You are the auditor of Jexel, an auto air-conditioner service and repair company, and you have decided to use the mean-per-unit method to test the existence and gross valuation of recorded accounts receivable. The client's records include 9,600 accounts with a total book value of $1,270,000. You decide to use tolerable misstatement of $217,000, an incorrect acceptance risk of 20 percent, and an incorrect rejection risk of 15.0 percent. Using Excel, you estimated the standard deviation of the population as...