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Solutions Manual – Public Accountancy Profession Cancel Download And Print
the bai for the audit opinion. he auditor control thi thi rik b" etting beta rik ufficientl" lo# a to !aintain o$erall audit rik at a le$el le than or e'ual to 10. 11. Refer to page page 6)5 of the textboo textbook. k. 12. Refer to page page 6)0 of the textbook. textbook. Multiple Choice Questions
1. 2.
b c
3. 4.
d c
5. 6.
d b
). 8.
a d
*. a 10. c
Comprehensive Cases
1.
a.
Are Area re' re'ui uirring ing the the aud auditor tor to !ak !akee ud udg!en g!entt deci decii ion on #hen #hen t tati atiti tical cal a!pling techni'ue are e!plo"ed onl" four re'uired 1 efini efining ng popula populatio tion, n, chara characte cteri riti tic c to be teted teted,, and de$iat de$iation ion. . nle nle a relati relation onhip hip i define defined d bet#ee bet#een n the occurr occurrenc encee rate rate of de$iat de$iation ion in the popula populatio tion n and either either the $alidi $alidit" t" of the client client financial financial tate!ent tate!ent or the trength of internal internal control, control, little little ueful ueful infor!ation i gained b" eti!ating the occurrence rate. 2 eter!ining the the appropriate appropriate tatitical tatitical election techni'ue for dra#ing a rando! a!ple. a!ple. he auditor auditor !ut recogni7e recogni7e the ad$antag ad$antage e and diad$ diad$ant antage age of trati tratifie fied d elect election ion,, untra untratif tified ied elect election ion,, and "te!atic election, and deter!ine #hich techni'ue i appropriate for electing an econo!ical rando! a!ple. 3 tablihing the re'uired re'uired !axi!u! tolerable de$iation rate rate and the rik of aeing aeing control control rik too lo# for the procedur procedure. e. hi re'uire re'uire udg!ent deciion regarding !aterialit", ti!e, cot, and the planned aeed le$el of control rik. 4 -nterpret -nterpreting ing a!ple a!ple reult reult.. hi re'uir re'uire e a deciion deciion a to to #hether #hether the reult upport the auditor planned aeed le$el of control rik, or #hether additional a!pling i necear" to reach a concluion. 5 5 /oll /ollo# o#in ing g up on the the dic dico$ o$er er" " of crit critic ical al erro error r or unac unacce cept ptab able le de$iation rate. 6 eter! eter!ini ining ng the circu! circu!tan tance ce under under #hich #hich tati tatiti tical cal a!pli a!pling ng i appropriate, and thoe in #hich other techni'ue hould be ued in lieu, of or to upple!ent, the tatitical a!pling techni'ue. hi i an open9ended open9ended 'uetion. he tudent !a" identif" identif" nu!erou other area in #hich the auditor !ut !ake udg!ent deciion.
b.
-f the :;A :;A a!ple a!ple ho# ho# an unaccept unacceptabl ablee de$iati de$iation on rate, rate, the" !a" take the follo#ing action
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Basic Audit Sampling Concepts
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1 1 he" he" !a" !a" enla enlarg rgee thei theirr a!pl a!plee to incr increa eae e the the prec preci iio ion n of thei theirr eti!ate. 2 he" !a" iolate iolate the t"pe of de$iati de$iation on and expand expand exa!ination exa!ination a it relate to the tranaction that gi$e rie to that t"pe of !itate!ent. 3 he auditor auditor uual uual repone repone to an unacceptabl" unacceptabl" high de$iatio de$iation n rate i to incre increae ae their their ae aeed ed le$el of contro controll rik. rik. Accord According ingl", l", the auditor #ould increae the intenit" of their ubtanti$e tet. c.
echni'ue echni'ue for elect electing ing an untra untratifi tified ed rando! rando! a!ple a!ple of account account pa"able pa"able $oucher include the follo#ing Random Sample. Sample . A rando! a!ple i a a!ple a!ple of a gi$en i7e dra#n dra#n fro! a population in a !anner uch that e$er" poible a!ple of that i7e i e'uall" likel" to be dra#n. dra#n. -te! !a" be elected rando!l" b" 1 able of of Rando! Rando! 40 after each of the t#o rando! tarting point bet#een 1 and 80 for each of the t#o e'uence.
2.
a.
1 %in %ince the the re reu ult lt of of te tet t of of con contr trol ol t"p t"pic ical all" l" pla" pla" a i igni gnifica ficant nt role ole in in deter!ining the nature, ti!ing, and extent of other audit procedure, the auditor uuall" pecif" a lo# le$el of rik of aeing control rik too lo#. -t i uuall" uuall" et at 5 or 10 percent. 2 -n deter!ining deter!ining the tolerabl tolerablee de$iation de$iation rate, an auditor auditor hould conider conider the planned aeed le$el of control rik and the extent of aurance deired fro! the e$idential !atter included in the a!ple. 3 -n deter! deter!ini ining ng the expected expected populati population on de$iat de$iation ion rate, rate, an audito auditorr hould conider the reult of prior "ear tet, the o$erall control en$iron!ent, or utili7e a preli!inar" a!ple.
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Solutions Manual – Public Accountancy Profession Cancel Download And Print b.
1 here here i i a decre decreae ae in in a!pl a!plee i7e i7e if the acce accepta ptable ble le$e le$ell of the the rik rik of aeing control rik too lo# i increaed. 2 here i a decreae in a!ple i7e if the tolerable tolerable de$iation de$iation i increaed. increaed. 3 here i an increae increae in a!ple a!ple i7e if the population population de$iati de$iation on rate i increaed.
c.
17.4 re$eal that ) de$iation ing ing a tati tatiti tical cal a!pli a!pling ng appr approac oach, h, Figure 17.4 re$eal in a a!ple of i7e 100 reult in an achie$ed upper de$iation rate of 12.8, #ell in exce exce of the tolerable tolerable de$iation de$iation rate 8. 8. he a!ple reult reult hould thu be interpreted a not upporting the planned aeed le$el of control rik. ing a nontati nontatitica ticall a!pling a!pling approach, approach, the ) eti!ated eti!ated population population de$iation rate identified in the a!ple ) de$iation > 100 a!ple ite! approa approache che the tolera tolerable ble de$iati de$iation on rate of 8. heref herefore ore,, uing uing a nontatitical approach, the a!ple reult #ould alo be interpreted a not upporting the planned aeed le$el of control rik.
d.
%tati %tatiti tical cal a!pl a!pling ing allo allo# # the audi auditor tor to 'uant 'uantif" if" a!p a!plin ling g rik. rik. A decribed in part c, onl" #hen tatitical a!pling i ued do the auditor kno# that the achie$ed upper de$iation rate i 12.8.
