Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 9, Problem 35QRA
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Indicate whether you agree or disagree with the following statements and explain your reasoning.
Joseph Cabana was explaining to Carl Metz how sampling risk works for the audit team: "Non-
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An auditor had decided to use probability-proportional-to-size (PPS) sampling, also called dollar-unit or cumulative monetary unit (CMU) sampling, in the audit of the client’s accounts receivable balance. The auditor discovered 3 misstatements while doing their testing. Complete the spreadsheet below and calculate the total projected misstatement.
Monetary Unit Sampling. Georgie Costanza, CPA, is auditing the accounts receivable of Vandalay Industries and is considering the use of MUS techniques. Costanza has a number of questions regarding the use of MUS and has asked you to provide answers to them.
Required:a. Under generally accepted auditing standards, can Costanza use nonstatistical sampling inthe examination of Vandalay accounts receivable?b. What are the advantages to using statistical sampling in the audit?c. What are the risks associated with sampling, and to what type of losses do they exposeCostanza?d. How does Costanza establish the appropriate level of the risk of incorrect acceptance?e. Is Costanza permitted to specify that certain items be examined, or do all items need tobe randomly selected?f. How can Costanza increase the likelihood that the items in the sample are representativeof the population?g. Other than the dollar amount of the misstatements, are any other factors important forCostanza to consider with…
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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- Evan Kristopher, CPA intends to use probability-proportional-to-size sampling. He has properly selected and audited a sample of 100 accounts receivable from his client’s population of 3,000 accounts. He calculated a sampling interval of $6,000 and the tolerable misstatement for the account is $30,000. Evan also recalls that “basic precision” is equal to the appropriate reliability factor multiplied times the sampling interval. He wishes to accept a risk of incorrect acceptance of 10%. He found that 97 of the 100 accounts in the sample were properly calculated. However, the following three errors existed: Book Value Audited Value $75 $70 1,000 750 9,300 6,720 Required: Calculate the projected misstatement. Calculate the basic precision. Calculate the incremental allowance. Calculate the upper limit on misstatement. What would the auditors’ conclusion be for the population based on the analysis? explain pleasearrow_forwardEvan Kristopher, CPA intends to use probability-proportional-to-size sampling. He has properly selected and audited a sample of 100 accounts receivable from his client’s population of 3,000 accounts. He calculated a sampling interval of $6,000 and the tolerable misstatement for the account is $30,000. Evan also recalls that “basic precision” is equal to the appropriate reliability factor multiplied times the sampling interval. He wishes to accept a risk of incorrect acceptance of 10%. He found that 97 of the 100 accounts in the sample were properly calculated. However, the following three errors existed: Book Value Audited Value $75 $70 1,000 750 9,300 6,720 Required: Calculate the projected misstatement. Calculate the basic precision. Calculate the incremental allowance. Calculate the upper limit on misstatement. What would the auditors’ conclusion be for the population based on the analysis?arrow_forwardd. Assume that based on additional controls implemented by ELM, your audit team has decided to reduce the expected misstatement from $77,928 to $19,482 (0.5 percent of the recorded balance of the transactions). What is the necessary sample size, holding all other factors constant?arrow_forward
- Jerry Tim is examining an important internal control in the audit of Langly Company. Inpast audits, deviations from this control have been observed at a minimal rate (less than 0.1percent); however, because the account balance affected by this control is highly susceptibleto fraud, it is important that Tim obtain a high level of assurance that deviations occur at nohigher than a predetermined (low) rate. Which of the following sampling methods wouldTim most likely use to evaluate this control?a. Attributes sampling.b. Discovery samplingarrow_forwardJerry Tim is examining an important internal control in the audit of Langly Company. Inpast audits, deviations from this control have been observed at a minimal rate (less than 0.1percent); however, because the account balance affected by this control is highly susceptibleto fraud, it is important that Tim obtain a high level of assurance that deviations occur at nohigher than a predetermined (low) rate. Which of the following sampling methods wouldTim most likely use to evaluate this control?a. Attributes sampling.b. Discovery sampling c. Sequential sampling.d. Statistical sampling.arrow_forwardIn non-statistical sampling, _______. the auditor determines samples size, sample selection methods, and evaluates the sample results on the basis of the professional judgment and the auditor’s own experience. the auditor determines samples size, sample selection methods, and evaluates the sample results entirely on the basis of predetermined statistical parameters. the auditor uses the internal audit function to gather samples the auditor selects a sample of certain balance sheet accounts and exclusively audits them If an auditor wishes to draw attention to important information that is already presented or disclosed in the financial statements, the auditor would include a _______. qualified opinion disclaimer of opinion emphasis-of-matter paragraph scope limitation paragraph _______ are used near the end of the audit to assist the auditor in forming an overall conclusion about whether the financial statements…arrow_forward
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