Kim Is a Senior Auditor at the Wing CPA Firm

Essay

Kim is a senior auditor at the Wing CPA firm. She is in charge of formulating
the audit plan for several key controls and accounts. Her manager has determined
that if any of the accounts she is working on are misstated by $20,000 the misstatement
is material. The account includes some unusual and significant transactions that
have occurred during the year. Kim wants to utilize sampling for her testing.
Required:
(a) How can Kim stratify the transactions in the account to best utilize sampling?
(b)What is sampling risk? How might it affect the audit conclusions Kim makes based
on the control tests?
(c) If Kim misses anything as a result of sampling, what audit procedures might
uncover the error during the ICFR audit? During the financial statement audit?