Exam 6: Sampling and Overview of the Risk Response Phase of the Audit

If the total projected error in an account balance was $3,248 and the tolerable error was set at $10,000, the auditor would:

Tests of controls are audit procedurdesigned to detect material misstatements at the assertion level.

What impact will there be on sample size for substantive testing when there is an increase in the tolerable misstatement?

Explain the differencbetween the main objectivof tests of controls and substantive procedures.

Before selecting a sample, an auditor will use professional judgment to:

When testing controls, non-sampling risk is the risk that an auditor:

Describe the major typof sampling techniquavailable to auditors.

Explain sampling risk as it relatto both tests of controls and substantive procedures.

Barry Menziwalked out of the Old Country Bakery operation and chewed on a Cheese Danish. He had chosen random selection to test for proper authorization of purchasing transactions. He had just completed the initial audit testing of the purchasing transactions and had evaluated the results. His conclusion was that the deviation rate of 12 exceptions in a sample of 80 transactions was relatively high. In addition, Barry was preparing to start the audit of another client, Rohr Industries, an airplane component manufacturer. He had discussed sampling methodology with his audit team and it had been determined that the Rohr Industrisystems did not lend themselveasily to statistical sampling techniques. The audit team would have to employ non-statistical sampling. Required: a) What is the procedure that Barry Menzies would follow when his initial testing showed a relatively high deviation rate for the Old Country Bakery transactions? b) What is non-statistical sampling? c) Describe the non-statistical sampling methods that were open to Barry and his team for the Rohr Industries audit. d) Which of Barry's two clients' systems would lend themselves to stratification?

Sampling is not required when:

Michael Fernandez has decided to perform substantive procedurat a major retailer. Which one of the following is not a substantive procedure?

When conducting substantive testing, which of the following is not a factor that influencthe sample size?

Daniel Beauchamp did not perform a true sample when he went to his client to examine salinvoices. He did not use any specific method for choosing the invoices. He let his eye catch the items he thought might make up his sample. What technique did he use?

An audit plan includthe audit procedurto be used when testing controls and when conducting detailed substantive audit procedures.

Tests of controls are conducted to establish that:

A range of sampling techniquare available to auditors. Evaluate the advantagand disadvantagof the major techniques.

When control risk is high, the audit strategy is to:

Projected error refers to the extrapolation of the errors detected when testing a sample to the population from which the sample was drawn.

Milushka Icaza, who was representing her CPA firm at a conference, made the following statement about assertions: When our auditors conduct substantive procedures, we search for evidence that recorded accounts exist and that all accounts that should have been recorded, indeed have been recorded. Which assertions was she talking about?

Richard Nucci used analytical procedurat his client, Ultimate Vacations. Which one of these is not an analytical procedure?