(Objectives 17-2, 17-3) The following apply to evaluating results of audit sampling for tests of details of balances. For each one, select the best response.
a. 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
(1) assessing control risk too high.
(2) assessing control risk too low.
(3) incorrect rejection.
(4) incorrect acceptance.
b. In an MUS sample with a sampling interval of $5,000, an auditor discovered that a selected accounts receivable with a recorded amount of $10,000 had an audit value of $8,000. If this is the only error discovered by the auditor, the projected error of the sample would be
(1) $1,000.
(3) $4,000.
(2) $2,000.
(4) $5,000.
c. The accounting department reports the accounts receivable balance as $175,000. You are willing to accept that balance if it is within $15,000 of the actual balance. Using a variables sampling plan, you compute a 95% confidence interval of $173,000 to $187,000. You would therefore
(1) find it impossible to determine the acceptability of the balance.
(2) accept the balance but with a lower level of confidence.
(3) take a larger sample before rejecting the sample and requiring adjustments.
(4) accept the $175,000 balance because the confidence interval is within the materiality limits.
Objective 17-2
Apply nonstatistical sampling to tests of details of balances.
Objective 17-3
Apply monetary unit sampling.
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