Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 9, Problem 29QRA
a.
To determine
Explain the advantages of applying statistical sampling techniques to audit testing.
b.
To determine
Explain the professional judgements required to be taken by the CPAs in applying statistical sampling techniques to tests of controls.
c.
To determine
Explain the desirable actions that should be taken by the auditor in case of higher deviation rate than the tolerable rate.
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TRUE OR FALSE
When sampling is used by an auditor, an element of uncertainty is present in the auditor's conclusion.
When evaluating the results of specific items selected for testing, its effects must be projected to the whole population.
In performing external confirmations, the management prepares the requests and receives and replies for communication to the auditor.
As the use of going concern assumption is always relevant un audit, the auditor shall evaluate whether uncertainty exists as the company's ability to continue as going concern.
Adverse key financial ratios and negative operating cash flows are some events that may cast doubt about the going concern of a company.
In searching for unrecorded liabilities, the population of audit interest is the schedule of accounts payable at period end.
Audit sampling refers to the application of audit procedures to less than 100% of the items in an account balance or class of transactions for the purpose of…
When the auditor has assessed control risk of a particular area at a reduced level, he or she will then
Select one:
a. eliminate the need to gather evidence in that area.
b. test the effectiveness of the controls in that area.
c. proceed to expand the sample sizes in that area.
d. negotiate with management to determine which controls will be tested in that area.
Statistical sampling and use of computer-assisted audit techniques (CAATs) are important to the IS audit for evidence gathering. Answer one of the following questions:
Explain the difference between statistical and non-statistical approaches to sampling. What do you think is most commonly used by auditors? Do you think the selection is situational-dependent?
Chapter 9 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQ
Ch. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - What is a dual-purpose test?Ch. 9 - Prob. 14RQCh. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - What would be the difference between an attributes...Ch. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - Prob. 20RQCh. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. 25RQCh. 9 - Prob. 26RQCh. 9 - Prob. 27RQCh. 9 - Prob. 28RQCh. 9 - Prob. 29QRACh. 9 - Prob. 30QRACh. 9 - Prob. 31QRACh. 9 - Prob. 32QRACh. 9 - Prob. 33QRACh. 9 - Prob. 34QRACh. 9 - Prob. 35QRACh. 9 - Prob. 36QRACh. 9 - Prob. 37AOQCh. 9 - Prob. 37BOQCh. 9 - Prob. 37COQCh. 9 - Prob. 37DOQCh. 9 - Prob. 37EOQCh. 9 - Prob. 37FOQCh. 9 - Prob. 37GOQCh. 9 - Prob. 37HOQCh. 9 - Prob. 37IOQCh. 9 - Prob. 37JOQCh. 9 - Prob. 37KOQCh. 9 - Prob. 37LOQCh. 9 - Prob. 38OQCh. 9 - Prob. 39OQCh. 9 - For each term in the first column below, identify...Ch. 9 - Prob. 41OQCh. 9 - Smith, Inc. Rachel Robertson wishes to use...Ch. 9 - Prob. 43OQCh. 9 - Prob. 44PCh. 9 - Prob. 45PCh. 9 - Prob. 46PCh. 9 - Prob. 47PCh. 9 - In the audit of Potomac Mills, the auditors wish...Ch. 9 - Prob. 49PCh. 9 - Prob. 50PCh. 9 - Prob. 51PCh. 9 - Prob. 52ITC
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Similar questions
- List and discuss the decisions involving professional judgment that must be made by the CPAs in applying statistical sampling techniques to tests of controls.arrow_forwardRisk of incorrect rejection is defined as _______. the risk that the auditor concludes that a material misstatement does not exist when it does exist the risk that the auditor concludes that a material misstatement exists when it does not exist the risk that an auditor incorrectly rejects a client the risk that management may reject the audit opinion issued by the auditor An advantage of statistical sampling _______. is that it allows an auditor to measure control risk is that it allows an auditor to measure sampling risk is that it allows an auditor to measure inherent risk is that it is cheaper to perform, resulting in lower audit fees for the clientarrow_forwardExplain how judgement is used in statistical and non-statistical sampling in an audit servicearrow_forward
- (c)Describe the factors which theauditor should consider whendetermining the size of a sample. (d) Describe to what extent statistical sampling enhances the quality of the audit evidence. (e) Explain how judgementis used in statistical and non-statistical sampling.arrow_forwardAttribute Sampling and Monetary-Unit Sampling are two sampling techniques designed to help an auditor test controls. Discuss how each are different and provide an example of how you would decide which one to use if you were auditing a company’s credit-check control for customer orders. Defend which technique, in your opinion, is more reliable. Provide examples to support your opinion.arrow_forward1.1.Sampling is important in an audit process. Briefly explain the value of sampling in the audit process. 1.2. Identify and explain the two types of sampling risks?arrow_forward
- Attribute sampling enables the auditor to directly assess whether a rule is operating successfully or not, sampling is more reliable for assessing controls. This is crucial in circumstances where data accuracy or completeness are essential, such as when a credit-check control is used for consumer orders. The focus is on estimating the overall monetary value of a population, therefore monetary-unit sampling is more suitable for verifying the accuracy of financial statements or specific account balances. It is crucial to remember that the exact audit objectives and the type of data being checked will determine the sampling technique that is used. Do you believe monteray unit sampling can do the same thing?arrow_forward• The Choose the answer from the menu in accordance to the question statement _--_ method includes both an estimate of the audited value of the population (or the amount of misstatements in the population) and an estimate of a statistical confidence interval, or allowance for sampling risk associated with the estimate. > Appropriate > Statstical sampling > Non-statistical sampling • Control risk is the risk that the sample chosen by the auditor is not representative of the population of transactions or items within an account balance and, as a consequence, the auditor arrives at an inappropriate conclusion. True Falsearrow_forwardThe two types of sampling risks that auditors face include the risk of incorrect acceptance and the risk of incorrect rejection. What do each of these mean and how will each impact the audit process and the audit results? Which is considered the more important risk?arrow_forward
- Tolerable error, is the maximum monetary error that the auditor is prepared to accept in the population and still conclude that audit objective has been achieved, is directly related to A.Sample size BAudit risk C.Materiality D.Expected errorarrow_forwardThe two types of sampling risks auditors face include the risk of incorrect acceptance and the risk of incorrect rejection. What do each of these mean and how will each impact the audit process and the audit results?arrow_forwardIn auditing, can anyone who uses sampling such as statistical and non-statistical sampling be absolutely sure that the sample is representative of the population from which it is drawn? Please provide references if any.arrow_forward
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