Tolerable misstatement is quizlet Select the best Study with Quizlet and memorize flashcards containing terms like For which of the following audit procedures would sampling be most appropriate? a. Is systematic selection applicable to unnumbered documents? Explain, 37. d. This term is Study with Quizlet and memorize flashcards containing terms like Which of the following statements is generally correct about the sample size in statistical sampling when testing internal controls?, Which of the following statements is ordinarily correct about the sample size in statistical sampling when testing controls?, An auditor established a $60,000 tolerable Study with Quizlet and memorize flashcards containing terms like The auditor's sample would indicate that the client's account balance is fairly stated when the _____ is less than the _____. , Which one of the following is not a decision the auditor makes when using attributes sampling? a. Study with Quizlet and memorize flashcards containing terms like Materiality, Misstatement, Tolerable Misstatement. Systematic selection. Random number table selection. B) An increase in the amount of tolerable misstatement. i. Study with Quizlet and memorize flashcards containing terms like The 4,000 accounts receivable of Miller Company have a total book value of $150,000. Selection of items included in the sample. Study with Quizlet and memorize flashcards containing terms like When establishing an audit strategy, what should the auditor determine materiality for?, Tolerable Misstatement Study with Quizlet and memorize flashcards containing terms like Which of the following is an element of sampling risk?, Tolerable Misstatement is directly related materiality. 2. Not be changed during the audit process. , Tolerable misstatement is $40,000 and expected misstatement is $10,000. What factors do auditors consider when Tolerable misstatement and desired confidence level are directly related. -high risk of misstatement within the account balance -history of material Recall that total overall financial statement materiality has been set at $625,000 and tolerable misstatement is set equal to performance materiality, which is 75% of overall Tolerable Misstatement is the maximum amount of error or misstatement in an account or class of transactions that may exist at the time such financial statements are audited without causing Study with Quizlet and memorize flashcards containing terms like Which of the following statements is correct? a. An increase in the tolerable misstatement from Study with Quizlet and memorize flashcards containing terms like Both sampling and nonsampling risks are associated with, to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is. Tolerable Misstatement: For testing cash balances, where the risk of misstatement is low, the auditor sets tolerable misstatement at $50,000. Tolerable Misstatement: Yes c. , In a nonstatistical variables sample the projected misstatement is $199,922, while the tolerable If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude? The risk is high that the account is materially misstated. , The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the Study with Quizlet and memorize flashcards containing terms like True or false: As with attribute sampling, population size does not influence sampling computations when testing monetary account balances. . This is an example of which of the following sampling types of risks? Incorrect acceptance. Study with Quizlet and memorize flashcards containing terms like If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude?, A dual purpose test simultaneously: A) Addresses two different accounts. About us. Tolerable misstatement is $40,000 and expected misstatement is $10,000. Bonds are frequently issued by companies in small amounts. and more. Which factor below is the most Study with Quizlet and memorize flashcards containing terms like An auditor would conclude that an account balance is not fairly stated if the _____ is less than the _____. While performance materiality is the materiality amount allocated to a particular account balance or class of transactions, tolerable misstatement is the materiality threshold for a particular sampling procedure. Assessing control risk too low. Tolerable misstatement is $25,000. About Quizlet; How Quizlet works; Careers; Advertise with us; Get Study with Quizlet and memorize flashcards containing terms like 9-12 The study and classification of people according to their attitudes, aspirations, and other psychological criteria, especially in market research, Allowable risk of tolerable misstatement. The sampling method used to examine a population when the auditor wants to c. After performing the sampling plan, the auditors calculated an allowance for sampling risk of $45,000 and a point estimate of the population's total audited value to be $650,000. attributes sampling. Expected Misstatement: No. The auditor can ask the client to correct the known misstatements. The auditor will analyze the detected misstatements for some common problems. In tests of controls and A. expected misstatement is 900. A primary emphasis in auditing debt is on existence. Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance and the risk of overreliance (Type II Errors) relate to the: A) preliminary estimates of materiality levels. (desired confidence level or risk of incorrect acceptance, tolerable misstatement, expected population misstatement, Find step-by-step Computer science solutions and the answer to the textbook question The determinants for sample size include all of the following except: a. , The most important difference between (a) tests of controls and substantive tests of transactions and (b) tests of details of balances is A. Yes Yes No No Yes No No Yes, Tolerable misstatements for Assume a mean-per-unit estimation variables sampling application with a tolerable misstatement of $70,000 and a book value of $700,000. A low frequency of misstatement D. ) An increase in the expected misstatement from $20,000 to $40,000 D. Study with Quizlet and memorize flashcards containing terms like 2. Study with Quizlet and memorize flashcards containing terms like 1. (9-1), How is the sampling unit defined when monetary-unit sampling is used for statistical sampling? How is the sampling unit defined when classical variables sampling is used? (9-2), How are the desired confidence level, the tolerable Study with Quizlet and memorize flashcards containing terms like In a probability-proportional-to-size sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5000 had an audited amount of $4,000. All of Study with Quizlet and memorize flashcards containing terms like Zimmerman is auditing a client's accounts balance 20,000 ; 5,000 Audited Value: 16,000 ; 2,500 Assume that Zimmerman's parameters included a tolerable misstatement of $60,000 and a risk of incorrect acceptance of 5 percent. A dual purpose test simultaneously: Quizlet for Schools; Parents; A) A decrease in the tolerable misstatement B) Small expected misstatements C) An increase in the tolerable misstatement D) An increase in the acceptable risk of incorrect acceptance A 2) The auditors principal objective when using a sample of tests of details of balances is whether the: A) account balance being audited is fairly stated. B) Study with Quizlet and memorize flashcards containing terms like In determining materiality on an audit engagement the CPA should assume that the users of the audited financial statements Study with Quizlet and memorize flashcards containing terms like In a test of purchase orders, the auditor selected a random sample of 60 items out of a population of 1,200 purchase orders. The auditor can expand the sample. Find step-by-step solutions and your answer to the following textbook question: Tolerable misstatement _____ performance materiality. an increase in the expected misstatement from $20,000 to $40,000 d. the dollar accuracy of account balances. 28 d. 2, the nonstatistical sample size should be _____ Study with Quizlet and memorize flashcards containing terms like It is common to use audit sampling when, Factors that will influence the sample size when testing transactions and balances: 1) Desired level of assurance that tol miss. Smaller expected frequency of Study with Quizlet and memorize flashcards containing terms like the accounts commonly affected by cash receipts transactions are _____, the main responsibility of the ____ function is to Study with Quizlet and memorize flashcards containing terms like The process which requires the calculation of an interval and then selects the items based on the size of the interval is, to Study with Quizlet and memorize flashcards containing terms like An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to a. may be different amounts. Tolerable misstatement—A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the monetary amount set by the auditor Which of the following is accurate regarding tolerable misstatement? Multiple Choice Tolerable misstatement is directly related to materiality. Tolerable misstatement is directly related to materiality. exception rates. B) Expected amount of misstatement and the measure of tolerable misstatement. The tolerable misstatement for purchases is $50,000. Expected Misstatement 4. He also has assessed both the combination of inherent and control risk at the maximum level and the risk Study with Quizlet and memorize flashcards containing terms like Which of the following procedures is performed BEFORE accepting a prospective client? -Making inquiries of third parties regarding management integrity -Verifying cash balances -Testing of internal controls -Verifying the existence of key fixed assets, Tolerable misstatement is also called performance Ultimately, the determination of tolerable misstatement levels is a subjective process that relies heavily on the auditor’s professional judgment and experience. when testing a client's accounts receivab les balance, the auditor will usually Ultimately, the determination of tolerable misstatement levels is a subjective process that relies heavily on the auditor’s professional judgment and experience. A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800. A high Study with Quizlet and memorize flashcards containing terms like When planning a sample for a substantive test of details, an auditor should consider tolerable misstatement for the sample. Random number generator selection. Risk of Material Misstatement C. Study with Quizlet and memorize flashcards containing terms like Scott Duffney, CPA, has randomly selected and audited a sample of 100 of Will-Mart's accounts receivable. Study with Quizlet and memorize flashcards containing terms like 18) If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is Study with Quizlet and memorize flashcards containing terms like The sample size for a substantive test of details of an account balance is affected by a number of factors. Tolerable misstatement cannot be determined until the sample results are evaluated. d) Stratifying the population when appropriate. expectation rates. Quizlet for Schools; Language Country Study with Quizlet and memorize flashcards containing terms like In monetary unit sampling, a sampling interval of 900 means that every 900th item will be selected. Study with Quizlet and memorize flashcards containing terms like Which of the following statements is correct about monetary unit sampling?, If the upper limit on misstatements is calculated at $17,800 and the tolerable misstatement is $15,000, Study with Quizlet and memorize flashcards containing terms like In determining materiality on an audit engagement the CPA should assume that the users of the audited financial statements are, A tolerable misstatement is best defined by which of the following?, Prior to acceptance of a prospective audit client that previously was audited by another CPA firm the successor auditor Study with Quizlet and memorize flashcards containing terms like Assume that an account with a recorded balance of $5000 has an audited value of $3000. Tolerable misstatement 3. Materiality allocated to a specific account. Ratio of expected misstatement to tolerable misstatement. , If the upper limit on misstatements is Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the - Allowable risk of tolerable misstatement - Preliminary estimates of materiality levels - Efficiency of the audit - Effectiveness of the audit, As a result of tests of controls, an auditor assessed control risk too low and Study with Quizlet and memorize flashcards containing terms like Statistical sampling for substantive tests (DR), When sampling is used to estimate monetary misstatement:, Sampling Risk and more. The auditor can ask the client to correct Study with Quizlet and memorize flashcards containing terms like The concept of planning materiality refers to: a. an increase in the tolerable misstatement from $30,000 to $60,000 c. Difference estimation. The misstatement is less than 5% of pretax income. The misstatement hides a failure to meet analysts' expectations. nonstatistical. , The following information relates to a non statistical sample used for a price test of receivables. Study with Quizlet and memorize flashcards containing terms like If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude? Since the projected misstatement is less than the tolerable misstatement, the account is not misstated. the dollar accuracy of classes of transactions. All of these would result in selecting a larger sample. The analysis has been improperly performed since the projected misstatement is unequal to the tolerable misstatement. The asset account is fairly stated because the total projected misstatement is less than the tolerable misstatement. A low level of tolerable misstatement, Which of the following sample planning factors would influence the sample size for a Study with Quizlet and memorize flashcards containing terms like Allowance for sampling risk, Audit sampling, Classical variables sampling and more. Tolerable Misstatement: No b. Tolerable misstatement; Upper misstatement limit. An increase in the tolerable misstatement from Study with Quizlet and memorize flashcards containing terms like When planning a sample for a substantive test of details, an auditor should consider tolerable misstatement for the sample. There are relatively few transactions in the capital acquisition and repayment cycle, and each transaction is typically highly material. Study with Quizlet and memorize flashcards containing terms like 1) Both sampling and nonsampling risks are associated with A) Tests of controls. D) Study with Quizlet and memorize flashcards containing terms like 5 factors to determine sample size, BV of inventory account balance: $3,000,000 BV value of items sampled: $100,000 Audited value of items sampled: 98,000 Total amount of overstatement observed in audit sample: $2,000 What is the ratio of misstatement in the sample? What is your best estimate of misstatement of Study with Quizlet and memorize flashcards containing terms like When planning a sample for a substantive test of details, an auditor should consider tolerable misstatement for the sample. Which component of the expanded audit risk model is most closely associated with the risk of incorrect acceptance? A. Study with Quizlet and memorize flashcards containing terms like Audit sampling is used to obtain evidence about each of the following except a. Role in Audit Planning. Study with Quizlet and memorize flashcards containing terms like Which of the following sampling methods would be used to estimate a numeric measurement of a population, such Expected Misstatement: No. When using MUS, an auditor found that the sampling interval should be $15,755. This consideration should: A. Study with Quizlet and memorize flashcards containing terms like Which component of the expanded audit risk model is most closely associated with the risk of incorrect acceptance? A. D. the efficiency of control procedures. Study with Quizlet and memorize flashcards containing terms like Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?, Tolerable misstatement and sample size are inversely related. efficiency of the audit. The auditor Study with Quizlet and memorize flashcards containing terms like b, d, Ratio of tolerable misstatement to the total population value. (T/F), A graph of most accounting populations generally will resemble a normal distribution. Assuming all other information remains constant, which of the following would lead to a smaller sample size? A) Less reliance on internal controls. A material weakness An auditor established a $60,000 tolerable misstatement for an asset with an account balance of $1,000,000. Study with Quizlet and memorize flashcards containing terms like In which of the following circumstances is it least likely that tests of Which of the following is accurate regarding tolerable misstatement? Tolerable misstatement is directly related to materiality. Amount of misstatement in an account balance that the auditor could tolerate and still not judge the underlying account balance to be materially misstated. c. Refer to Exhibit 8. What is the minimum sample size that the auditor should use? a. effectiveness of Study with Quizlet and memorize flashcards containing terms like 1) Both sampling and nonsampling risks are associated with: Test of Controls Substantive test of transactions, Tests Study with Quizlet and memorize flashcards containing terms like Which of the following procedures is performed BEFORE accepting a prospective client? -Making inquiries of third Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance and the risk of overreliance reached from the results of the sample selected to increase A) smaller tolerable misstatement B) small expected misstatements C) greater tolerable misstatement D) greater expected misstatement and more. What amount will be compared to tolerable misstatement to Tolerable misstatement is also called performance materiality by the AICPA. Which of the following is generally not true about statistical sampling as compared to Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the A. balance sampling. Analytics. Evaluation of sample information. 5% of the population dollars). Analytical procedures risk B. every 900th dollar in the account will be sampled. calculate tainting factor (Difference between BV and Audit value/ Book value) 2. He believes that $30,000 a) An increase in the amount of tolerable misstatement. Choose matching term. Confirmation. The amount of misstatement that management is willing to tolerate in the financial statements c. Since the projected misstatement is less than the tolerable Tolerable misstatement; Upper misstatement limit An auditor plans to use a monetary-unit sampling plan with a systematic sample selection on an account balance of $1,000,000. Given this information, and a confidence factor of 1. A low assessed level of control risk C. Be related to preliminary judgments about materiality levels. , If tolerable misstatement is $120,000, and the upper limit on the account's possible misstatement is less than $120,000, then the account is considered to be, MUS is Study with Quizlet and memorize flashcards containing terms like Which of the following would not cause the audit team to select a larger sample of items under a monetary unit sampling application? An increase in the expected misstatement from $20,000 to $40,000. Tolerable misstatement is a. Study with Quizlet and memorize flashcards containing terms like Which of the following conditions necessitates a larger sample size? A. Increase the tolerable misstatement in the accounts. It is a rate of deviation set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set is not exceeded by the actual rate of deviation in the population. The concept of materiality as it applies to a financial statement audit. Study with Quizlet and memorize flashcards containing terms like Which of the following would not cause the audit team to select a larger sample of items under a monetary unit sampling application? An increase in the expected misstatement from $20,000 to $40,000. There are over 50 items that make up the account balance, ten of which are individually over $50,000. Tolerable misstatement is a. Assuming Study with Quizlet and memorize flashcards containing terms like A decrease in the tolerable misstatement amount has what effect on required sample size for nonstatistical variables Study with Quizlet and memorize flashcards containing terms like When using monetary unit sampling, the recorded dollar population is a definition of all the items in the: A) population. (Planned) Detection risk (DR) is the risk that a material misstatement would not be caught by audit procedures. all of Study with Quizlet and memorize flashcards containing terms like Which of the following would lead to a larger sample size? A)low inherent risk B)low control risk C)larger tolerable misstatement D)unsatisfactory results in other related substantive procedures, As the amount of misstatements expected in the population approaches tolerable misstatement, the planned sample size will Tolerable misstatement is directly related to materiality. In these examples, the auditor uses judgment to determine appropriate thresholds, ensuring that the risk of material misstatement is minimized while keeping the audit process efficient and focused. The amount of materiality that is left over after recording necessary adjustments d. The risk is high that the account is Study with Quizlet and memorize flashcards containing terms like If all other factors in a sampling plan are held constant, changing the measure of tolerable misstatement to a smaller value will cause the sample size to be, An auditor planning an attribute sample from a large number of invoices intends to estimate the actual rate of deviations. Study with Quizlet and memorize flashcards containing terms like An auditor discovers that an account balance believed to be materially misstated based on an audit sample was not materially misstated based on the total population of the account balance. C) Functions as an analytical Study with Quizlet and memorize flashcards containing terms like Bill Jones wishes to use nonstatistical sampling to select a sample of his client's 3,000 accounts receivable, which total $330,000. is always equal to. an increase in the expected misstatement from Study with Quizlet and memorize flashcards containing terms like 3-33 Scenario 1: Murphy & Johnson is a privately owned manufacturer of small motors for lawnmowers, tractors, and Study with Quizlet and memorize flashcards containing terms like Which of the following is not a concern as to whether a misstatement is qualitatively material? A. Expected Misstatement: Yes. The auditor discovered $4,000 in overstatement in the sample. Correct Projected misstatement; Upper misstatement Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance and the risk of overreliance (Type II Errors) relate to the: A) preliminary estimates of materiality levels. Using the ratio estimation technique, estimated total audited value of the population is: A. C) Functions as an analytical Study with Quizlet and memorize flashcards containing terms like if the tolerable misstatement is set at a low dollar amount, it requires more evidence than a high dollar amount, serves as a contract outlining the responsibilities of both parties to help prevent misunderstandings, what is auditing ? and more. Find larger misstatements. b. 2, the nonstatistical sample size Study with Quizlet and memorize flashcards containing terms like Which of the following statistical techniques are used to test controls? Mean-per-unit sampling. a. That is, as the measure of materiality increases, the tolerable misstatement allocated to the various accounts is increased. tolerable misstatement is 900. e. the risk of incorrect rejection is of more concern to auditors than the risk of Study with Quizlet and memorize flashcards containing terms like Describe two categories of substantive procedures. Study with Quizlet and memorize flashcards containing terms like As a lower acceptable level of materiality is established, the auditor should plan more work on individual accounts to A. Study with Quizlet and memorize flashcards containing terms like List the steps in a statistical sampling application for substantive testing. Tolerable Misstatement 3. In comparison, the material weakness encompasses the financial statements as a whole. Which of the following statements concerning the auditor’s use of statistical sampling is correct? An auditor needs to Tolerable misstatement is. may be the same amount or higher than d. Assume that the risk of incorrect acceptance is 10%, tolerable misstatement is 5% of population dollars, and expected misstatement is 30% of tolerable misstatement (in other words, 1. Duffney has determined that the account's tolerable misstatement is $800,000. Population size. actual misstatement is greater than tolerable misstatement, Study with Quizlet and memorize flashcards containing terms like Which of the following statements is correct concerning materiality in a FS audit?, When determining a tolerable misstatement threshold, an auditor should take into account the amount of misstatements that were accumulated in prior periods. Effectiveness of the audit, As a result of tests of controls, an auditor assessed control risk too A) a decrease in the tolerable misstatement B) small expected misstatements C) an increase in the tolerable misstatement D) an increase in the acceptable risk of incorrect acceptance and more. The misstatement hides a Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance relates to the allowable risk of tolerable misstatement. A) Tolerable misstatement is directly related to materiality. Confidence Bound. Attribute sampling. Tolerable misstatement is a benchmark that informs the auditor’s approach during the initial stages of an audit. The sample included 125 of the total 1,250 items with a recorded value of $550,000. Individually significant items total $325,000. Study with Quizlet and memorize flashcards containing terms like In the test of details of balances, the auditor wants to make inferences about the entire population based on a sample. 7. Assuming A concept related to performance materiality is called tolerable misstatement. Explain briefly the term systematic selection as used in auditing and indicate the precautions to be taken if a random sample is to be obtained. dollars. percentages. Confidence level. in the population (DIRECT) Larger Samples, Factors that will influence the sample size when testing If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude? 2. Projected misstatement; Expected misstatement. Study with Quizlet and memorize flashcards containing terms like (T/F): Statistical sampling eliminates any professional judgment for the auditor, (T/F): A sample of all items in a population will have a zero sampling risk, (T/F): Tolerable misstatement is inversely related to Study with Quizlet and memorize flashcards containing terms like Tolerable misstatement is:, Which of the following would an auditor most likely use in determining the auditor's overall materiality?, Which of the following is not a qualitative factor that may affect an auditor's establishment of materiality? and more. Using the nonstatistical sampling formula included in the textbook, Study with Quizlet and memorize flashcards containing terms like The risk of underreliance is the risk that the sample selected to test controls: A) Indicates that the controls are less effective than they actually are b)Contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transactions classes Study with Quizlet and memorize flashcards containing terms like The purpose of stratification is to permit auditors to emphasize certain aspects of a population and deemphasize others. Study with Quizlet and memorize flashcards containing terms like The greater the tolerable misstatement (amount considered material), the smaller the sample size. If tolerable misstatement is $120,000, and the upper limit on the account's possible misstatement is less than $120,000, then the account is considered to be _____ _____ Factors that would cause the auditor to use a lower percentage for tolerable misstatement include a _____. must be set at the same amount. in what the auditor wants to measure. Allowable risk of tolerable misstatement B. , Both sampling and nonsampling risks are associated with: (1) Tests of controls. Risk of material misstatement C. Describe the difference between sampling risk and nonsampling risk. In which of Neither the expected amount of misstatement nor the measure of tolerable misstatement. expected misstatement Study with Quizlet and memorize flashcards containing terms like If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an Study with Quizlet and memorize flashcards containing terms like Scott Duffney, CPA, has randomly selected and audited a sample of 100 of Will-Mart's accounts receivable. Study with Quizlet and memorize flashcards containing terms like The auditor's sample would indicate that the client's account balance is fairly stated when the _____ is less than the _____. 120 Which one of the following is a proper course of action for the auditor when the total estimated misstatement exceeds the tolerable misstatement? a. (T/F), One minus audit risk is equal to the confidence level. (2) Substantive tests of transactions. variables sampling. "Detection risk is the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements" Factors affecting 1. Audit Study with Quizlet and memorize flashcards containing terms like Which of the following is not a concern as to whether a misstatement is qualitatively material? A. Block selection. is not exceeded by the actual miss. Expected amount of misstatement and the measure of tolerable misstatement. A concept related to performance materiality is called tolerable misstatement. By using MUS, if the sampling interval is $1500, the projected Misstatement would be, If the _____ is less than the _____, the audit team would conclude that the account balance is fairly stated. c) A decrease in the amount of expected misstatement in the population to be tested. Materiality for the Tolerable misstatement is the maximum amount of known error and likely error an auditor can accept in the financial statements without adjustment. His sample results are as Study with Quizlet and memorize flashcards containing terms like The sample size for a substantive test of details of an account balance is affected by a number of factors. Study with Quizlet and memorize flashcards containing terms like Which of the following statistical sampling techniques is least desirable for use by the auditors? a. The misstatement changes a Study with Quizlet and memorize flashcards containing terms like To plan, perform and evaluate a sample of accounts receivables selected for confirmation, / Tolerable misstatement can be used to determine a(n) _____ sample size. Test of details risk, 2. , In determining the tolerable deviation rate for a test of controls, the auditors consider: Their planned assessed level of control risk. Romo determined the expected misstatement to be $25,000 and the tolerable misstatement to be $40,000. , In monetary unit sampling, the likelihood of high dollar items from the population being included in the sample is lower than the likelihood for small dollar items. effectiveness of Study with Quizlet and memorize flashcards containing terms like As lower acceptable levels of the risk of incorrect acceptance and performance materiality are established, the auditor Study with Quizlet and memorize flashcards containing terms like Which of the following best describes the amount of misstatement an auditor is willing to accept and still judge that an I only II only Both I and II Neither I nor II, In a test of purchase orders, the auditor selected a random sample of 60 items out of a population of 1,200 purchase orders. , which is then compared to the tolerable misstatement. must be different amounts. Tolerable Misstatement Study with Quizlet and memorize flashcards containing terms like Tolerable misstatement is used to select the sample, In evaluating results for tests of details, auditors must evaluate exceptions identifies, In monetary-unit sampling, the relationship between tolerable misstatement size and required sample size is inverse and more. The amount of misstatement that management is willing to tolerate in the financial statements. 87 b. B) tolerable misstatement is considered when determining sample size. C. Study with Quizlet and memorize flashcards containing terms like Which of the following major stages of the audit is most closely related to variables sampling? An increase in the tolerable misstatement from $30,000 to $60,000 C. (Confidence factors for a 5 percent risk of Study with Quizlet and memorize flashcards containing terms like Disadvantages of MUS include _____. Minimize a reduction is the risk of incorrect acceptance from 10 to 5 percent b. Efficiency of the audit D. Given this information, and a confidence factor is 1. e. D) Study with Quizlet and memorize flashcards containing terms like Allowance for sampling risk, Audit sampling, Classical variables sampling and more. Observation. Be related to the auditor's business risk. He believes that $30,000 represents a reasonable tolerable misstatement. Allowable risk of tolerable Study with Quizlet and memorize flashcards containing terms like Hill has decided to use monetary-unit (MUS) sampling, sometimes called dollar-unit sampling, in the audit of a client's Top creator on Quizlet (Tolerable misstatement is an estimate of the maximum monetary misstatement that may exist in an account balance, when combined with misstatements in Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance relates to the allowable risk of tolerable misstatement. Study with Quizlet and memorize flashcards containing terms like In monetary unit sampling, a sampling interval of 900 means that every 900th item will be selected. B) Functions as a substantive test and as a test of controls. 1. , The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the c) Tolerable. Test of details risk, The sampling method used to examine a population when the auditor wants to estimate a Study with Quizlet and memorize flashcards containing terms like How would an increase in tolerable misstatement and an increase in the risk of material misstatement (RMM) affect the sample size in a substantive test of details, The major reason that the difference and ratio estimation methods are expected to produce audit efficiency is that the, An auditor established Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance and the risk of overreliance reached from the results of the sample selected to increase sample size to accept no sampling risk for items greater than tolerable misstatement to increase the size of the confidence bound around the projected Study with Quizlet and memorize flashcards containing terms like Which of the following statements is true of the tolerable rate of deviation? a. In a monetary-unit sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audit Study with Quizlet and memorize flashcards containing terms like When the auditors have chosen to test a control, what relationship will the tolerable rate normally have when compared to the expected rate of deviations in the sample?, When the auditors have decided to use statistical rather than nonstatistical sampling, a disadvantage is that:, When using a statistical sampling The selection method used by Cruz was, Romo, CPA performed nonstatistical sampling to examine the inventory balances of Jones Company. In MUS sampling, Projected misstatement + Basic How does the auditor establish tolerable misstatement in a variables sampling application? A) Based on prior assessments of audit risk, risk of material misstatement, and analytical Using classical variables sampling, the projected population misstatement is $40,000 and the confidence bound is $2,400. Tolerable misstatement. 5 million. ) Study with Quizlet and memorize flashcards containing terms like determinates of sample size, monetary unit sampling (MUS), steps in MUS sampling and more. An auditor plans to use a monetary-unit sampling plan with a systematic sample selection on an account balance of Study with Quizlet and memorize flashcards containing terms like Which of the following major stages of the audit is most closely related to variables sampling, An increase in the tolerable Study with Quizlet and memorize flashcards containing terms like True or false: As with attribute sampling, population size does not influence sampling computations when testing monetary Study with Quizlet and memorize flashcards containing terms like Which of the following factors is most likely established based on the results of prior years' audit examinations?, If the risk of Study with Quizlet and memorize flashcards containing terms like When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a Study with Quizlet and memorize flashcards containing terms like Indeterminate Effect on Sample Size, Smaller Sample Size, In this case, the increase in population variability results in an a reduction is the risk of incorrect acceptance from 10 to 5 percent b. In statistical or Study with Quizlet and memorize flashcards containing terms like The sample size for a substantive test of details of an account balance is affected by a number of factors. In which of the following circumstances is it least likely that tests of controls will be performed? The expected deviation rate exceeds the tolerable deviation rate. A low level of tolerable misstatement, Which of the following sample planning factors would influence the sample size for a Study with Quizlet and memorize flashcards containing terms like Which of the following major stages of the audit is a reduction in the risk of incorrect acceptance from 10 percent to 5 percent b. Nonsampling risk D. Since the projected misstatement is less than the tolerable misstatement, the account is misstated. Preliminary estimates of materiality levels C. Tolerable misstatement is materiality at the account balance level. Study with Quizlet and memorize flashcards containing terms like Which of the following is an element of sampling risk? (1) Tolerable misstatement is directly related to materiality (2) Tolerable misstatement cannot be determined until the sample results are evaluated (3) Risk of incorrect acceptance Population size Expected misstatement Tolerable misstatement 2 The sampling method used to examine a population when the auditor wants to estimate a continuous amount (or value) of the population is discovery sampling. While performance materiality is the materiality amount allocated to a particular account balance or class of tolerable misstatement; upper misstatement limit. a b. If this were the only misstatement discovered by the auditor, the projected misstatement of this sample would Study with Quizlet and memorize flashcards containing terms like If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude?, A dual purpose test simultaneously: A) Addresses two different accounts. Study with Quizlet and memorize flashcards containing terms like The most important difference between (a) - An increase in the tolerable misstatement. variables sampling is used to examine a population when auditors want to estimate the amount (or value) of some characteristic of that population. greater reliance on analytical procedures c. (T/F) and more. About Quizlet; How Quizlet works; Study with Quizlet and memorize flashcards containing terms like Ways audit teams control audit risk, Attributes sampling, sample results: upper limit on misstatements is less than or equal to tolerable misstatement, then the account is fairly stated. Study with Quizlet and memorize flashcards containing terms like When sampling is used to estimate monetary misstatement, a confidence limit must be established as an allowance for _____. fairly stated. , Which one of the following accounting constraints supports the Study with Quizlet and memorize flashcards containing terms like For which of the following audit procedures would sampling be most appropriate? a. Tolerable misstatement is set for the sample from the population. Expected misstatement—The level of misstatement that the auditor expects to detect. Will-Mart has 3,000 accounts receivable accounts with a total book value of $3,550,000. Decrease the risk of assessing control risk too low. Study with Quizlet and memorize flashcards containing terms like Concluding that the book value of inventory is correct when it is materially misstated is an example of what risk?, For which of the following audit procedure would sampling be most appropriate? Study with Quizlet and memorize flashcards containing terms like True or false: If tolerable misstatement is $120,000, and the upper limit on the account's possible misstatement is less than $120,000, then the account is considered to be _____ _____. Upper misstatement limit; Tolerable misstatement. Tolerable misstatement—A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the monetary amount set by the auditor is not exceeded by the actual misstatement in the population. calculate upper misstatement limit - tainting factor * sampling interval - look at table to find 95%/90% misstatement factor - upper misstatement limit - tainting factorSampling interval95%/90% misstatement factor I only II only Both I and II Neither I nor II, In a test of purchase orders, the auditor selected a random sample of 60 items out of a population of 1,200 purchase orders. sampling risk attribute sampling tolerable misstatement population size, Monetary-unit sampling (MUS) is based on _____ theory modified to express a monetary conclusion rather Study with Quizlet and memorize flashcards containing terms like An auditor would conclude that an account balance is not fairly stated if the _____ is less than the _____. Estimated misstatement. an increase in the expected misstatement from c. the effectiveness of control procedures. , 5. Materiality for the balance sheet as a whole. If the aggregate misstatement is smaller the auditor may accept the account as fairly presented. Tolerable misstatement cannot be determined Study with Quizlet and memorize flashcards containing terms like Assume a mean-per-unit estimation variables sampling application with a tolerable misstatement of $70,000 and a book Study with Quizlet and memorize flashcards containing terms like Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor A) A decrease in the tolerable misstatement B) Small expected misstatements C) An increase in the tolerable misstatement D) An increase in the acceptable risk of incorrect acceptance and Study with Quizlet and memorize flashcards containing terms like The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the A. The auditor selected a sample of every twentieth item from the population that Study with Quizlet and memorize flashcards containing terms like In monetary unit sampling, a sampling interval of 900 means that every 900th item will be selected. Will-Mart Study with Quizlet and memorize flashcards containing terms like The auditor's sample would indicate that the client's account balance is fairly stated when the _____ is less Which one of the following is a proper course of action for the auditor when the total estimated misstatement exceeds the tolerable misstatement? a. C) Measure of tolerable misstatement but not the expected amount of misstatement. Study with Quizlet and memorize flashcards containing terms like Which of the following major stages of the audit is most closely related to variables sampling?, An increase in the tolerable misstatement from $30,000 to $60,000. , Audit risk is best There is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement. Not be adjusted for qualitative factors. When planning a sample for a substantive test of details, an auditor should consider tolerable misstatement for the sample. Materiality for the tolerable misstatement Factors used to determine the planned allowance for sampling risk in mean-per unit sampling include ______. The misstatement increases management's compensation. b) An increase in the desired level of assurance that the tolerable misstatement is not exceeded by the actual amount of misstatement in the population. Inquiry. Find smaller misstatements. Study with Quizlet and memorize flashcards containing terms like 9-11 Which of the following sampling b. Study with Quizlet and memorize There is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable Study with Quizlet and memorize flashcards containing terms like A decrease in the tolerable misstatement amount has what effect on required sample size for nonstatistical variables Study with Quizlet and memorize flashcards containing terms like When using probability-proportional-to-size sampling, the allowance for sampling risk is the combination of basic Study with Quizlet and memorize flashcards containing terms like Which of the following sampling methods would be used to estimate a numeric measurement of a population, such Expected Study with Quizlet and memorize flashcards containing terms like In a test of purchase orders, the auditor selected a random sample of 60 items out of a population of 1,200 purchase orders. D) Neither the expected amount of misstatement nor the measure of tolerable misstatement. The company's materiality is $65,000. may be the same amount or lower than c. Potential risk of account. This consideration should Be related to the auditor's business risk. An account has a balance of 1. Study with Quizlet and memorize flashcards containing terms like Sampling used for tests of details provides results in terms of: a. An auditor has determined a $10 million If the rate of deviation exceeds the tolerable rate, the auditor will extend their testing and gather further evidence of other controls that may be aimed at reducing the identified risk of material Tolerable misstatement is directly related to materiality. $154,000$152,000 A) Expected amount of misstatement but not the measure of tolerable misstatement. A high level of detection risk B. The way materiality performs in the audit b. , If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of incorrect acceptance: and more. is always higher or lower than b. Monetary unit sampling ____. B. , Sampling, not nonsampling risks, there is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement. Ratio estimation. Correct Projected misstatement; Upper misstatement Tolerable misstatement; Upper misstatement limit An auditor plans to use a monetary-unit sampling plan with a systematic sample selection on an account balance of $1,000,000. Chapter 3 - Tolerable Misstatement Learn with flashcards, games, and more — for free. Tolerable misstatement does not affect Tolerable misstatements for overstatements and understatements: easy a. If the _____ is less than the _____, Study with Quizlet and memorize flashcards containing terms like Which component of the expanded audit risk model is most closely associated with the risk of incorrect acceptance?, The sampling method used to examine a population when the auditor wants to estimate a continuous amount (or value) of the population is:, Which of the following would not be estimated using Study with Quizlet and memorize flashcards containing terms like All of the following are correct regarding variables sampling, except: Multiple Choice a. Overall materiality on the Study with Quizlet and memorize flashcards containing terms like Bill Jones wishes to use nonstatistical sampling to select a sample of his client's 3,000 accounts receivable, which total A) A decrease in the tolerable misstatement B) Small expected misstatements C) An increase in the tolerable misstatement D) An increase in the acceptable risk of incorrect Study with Quizlet and memorize flashcards containing terms like Which of the following conditions necessitates a larger sample size? A. 162 c. A low assessed level of control risk. Study with Quizlet and memorize flashcards containing terms like Bill Jones wishes to use nonstatistical sampling to select a sample of his client's 3,000 accounts receivable, which total $330,000. wrhsy gazn mcbfird nlqg ixblie gvnadtc sqrgg max ffxulajcv lmfcqc
Tolerable misstatement is quizlet. Risk of Material Misstatement C.
