Audit Review 1

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Joens1313
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Audit Review 1
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2015-09-20 01:41:59
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Audit Review 1
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  1. Probability-proportional-to-size (PPS) sampling selects a sample based on dollars, not individual items. If the sampling interval for a particular asset is $12,000, every invoice that has a value of over $12,000 will be selected. Large-dollar-value items have a higher chance of being selected in the testing, and overstatements are more likely to be detected than understatements.

    Since PPS sampling is used in the test of details, the auditor would consider two types of risk:--------------------- and --------------------------------. The auditor controls those risks by determining the risk level for the sample.
    Probability-proportional-to-size (PPS) sampling selects a sample based on dollars, not individual items. If the sampling interval for a particular asset is $12,000, every invoice that has a value of over $12,000 will be selected. Large-dollar-value items have a higher chance of being selected in the testing, and overstatements are more likely to be detected than understatements.Since PPS sampling is used in the test of details, the auditor would consider two types of risk: incorrect acceptance and incorrect rejection. The auditor controls those risks by determining the risk level for the sample.
  2. Probability-proportional-to-size (PPS) sampling selects a sample based on dollars, not individual items. If the sampling interval for a particular asset is $12,000, every invoice that has a value of over $12,000 will be selected. ----------------------------- have a higher chance of being selected in the testing, and overstatements are more likely to be detected than understatements.

    Since PPS sampling is used in the test of details, the auditor would consider two types of risk: incorrect acceptance and incorrect rejection. The auditor controls those risks by determining the risk level for the sample.
    Probability-proportional-to-size (PPS) sampling selects a sample based on dollars, not individual items. If the sampling interval for a particular asset is $12,000, every invoice that has a value of over $12,000 will be selected. Large-dollar-value items have a higher chance of being selected in the testing, and overstatements are more likely to be detected than understatements.

    Since PPS sampling is used in the test of details, the auditor would consider two types of risk: incorrect acceptance and incorrect rejection. The auditor controls those risks by determining the risk level for the sample.
  3. Probability-proportional-to-size (PPS) sampling selects a sample based on dollars, not individual items. If the sampling interval for a particular asset is $12,000, every invoice that has a value of over $12,000 will be selected. Large-dollar-value items have a higher chance of being selected in the testing, and --------------------- are more likely to be detected than ------------------.

    Since PPS sampling is used in the test of details, the auditor would consider two types of risk: incorrect acceptance and incorrect rejection. The auditor controls those risks by determining the risk level for the sample.
    Probability-proportional-to-size (PPS) sampling selects a sample based on dollars, not individual items. If the sampling interval for a particular asset is $12,000, every invoice that has a value of over $12,000 will be selected. Large-dollar-value items have a higher chance of being selected in the testing, and overstatements are more likely to be detected than understatements.

    Since PPS sampling is used in the test of details, the auditor would consider two types of risk: incorrect acceptance and incorrect rejection. The auditor controls those risks by determining the risk level for the sample.
  4. In reviewing accounting estimates prepared by management, the auditor should?
    In reviewing accounting estimates prepared by management, the auditor should?

    perform retrospective review of prior-period estimates to determine a possible bias.
  5. On December 30, 20X1, Vida Co. had cash of $200,000, a current ratio of 1.5:1 and a quick ratio of 0.5:1. On December 31, 20X1, all cash was used to reduce accounts payable. How did these cash payments affect the ratios?
    Increased current ratio and decreased quick ratio

    Note that cash is included in the numerator and accounts payable is in the denominator of both ratios:     

    • Current ratio = Current assets / Current liabilities     
    • Quick ratio = Quick assets / Current liabilities

    In the case of the current ratio, assume that the 1.5:1 ratio represents $150 of current assets to $100 of current liabilities. If $50 of cash is used to pay off $50 of current liabilities the current ratio is increased to 2:1 (i.e., $100 of current assets to $50 of current liabilities). This would occur in any situation in which the ratio was greater than 1:1. If a ratio is less than 1:1, the opposite would hold true.

    • In Vida Co.'s case the quick ratio would decrease.
  6. Current ratio =----------------- / Current liabilities
    Current ratio = Current assets / Current liabilities
  7. Current ratio = Current assets / ---------------------
    Current ratio = Current assets / Current liabilities
  8. ---------------------- = Current assets / Current liabilities
    Current ratio = Current assets / Current liabilities
  9. Current ratio = ------------- / ----------------
    Current ratio = Current assets / Current liabilities
  10. ------------------------ = Quick assets / Current liabilities
    Quick ratio = Quick assets / Current liabilities
  11. Quick ratio = Quick assets / ---------------------
    Quick ratio = Quick assets / Current liabilities
  12. Quick ratio = -------------------- / Current liabilities
    Quick ratio = Quick assets / Current liabilities
  13. Quick ratio = -----------------------------------
    Quick ratio = Quick assets / Current liabilities
  14. Two types of sampling risk that affect performing tests of controls are:

    The risk of assessing control risk too low

    -------------------------------------

    If the auditor assesses ---------------, which would occur if there are deviations from an internal control procedure in the sample, additional substantive procedures would normally be applied and oftentimes results in the true operating effectiveness of the control at a lower rate.
    Two types of sampling risk that affect performing tests of controls are:

    The risk of assessing control risk too low

    The risk of assessing control risk too high

    If the auditor assesses control risk too high, which would occur if there are deviations from an internal control procedure in the sample, additional substantive procedures would normally be applied and oftentimes results in the true operating effectiveness of the control at a lower rate.
  15. Two types of sampling risk that affect performing tests of controls are:

    --------------------------------------

    The risk of assessing control risk too high

    If the auditor assesses control risk too high, which would occur if there are deviations from an internal control procedure in the sample, additional substantive procedures would normally be applied and oftentimes results in the true operating effectiveness of the ---------------------------------.
    Two types of sampling risk that affect performing tests of controls are:

    The risk of assessing control risk too low

    The risk of assessing control risk too high

    If the auditor assesses control risk too high, which would occur if there are deviations from an internal control procedure in the sample, additional substantive procedures would normally be applied and oftentimes results in the true operating effectiveness of the control at a lower rate.
  16. Two types of sampling risk that affect performing tests of controls are:

    ----------------------------------------------

    ------------------------------------------------
    Two types of sampling risk that affect performing tests of controls are:

    The risk of assessing control risk too low

    The risk of assessing control risk too high

    If the auditor assesses control risk too high, which would occur if there are deviations from an internal control procedure in the sample, additional substantive procedures would normally be applied and oftentimes results in the true operating effectiveness of the control at a lower rate.
  17. Two types of sampling risk that affect performing tests of controls are:

    The risk of assessing control risk too------

    The risk of assessing control risk too --------

    If the auditor assesses control risk too------, which would occur if there are deviations from an internal control procedure in the sample, additional substantive procedures would normally be applied and oftentimes results in the true operating effectiveness of the control at a --------- rate.
    Two types of sampling risk that affect performing tests of controls are:

    The risk of assessing control risk too low

    The risk of assessing control risk too high

    If the auditor assesses control risk too high, which would occur if there are deviations from an internal control procedure in the sample, additional substantive procedures would normally be applied and oftentimes results in the true operating effectiveness of the control at a lower rate.
  18. To determine whether internal control relative to the revenue cycle of a wholesaling entity is operating effectively in minimizing the failure to prepare sales invoices, an auditor most likely would select a sample of transactions from the population represented by the:
    shipping document file.


    In the revenue cycle of a wholesaling entity, customers are invoiced when goods are shipped. Each shipping document should have a corresponding sales invoice. If a shipping document selected in the sample does not have a corresponding invoice, then the auditor has found a deviation in the tests of controls. Depending on the number of deviations found, the auditor may determine that the internal control to ensure that sales invoices are prepared for goods shipped is not operating effectively. Examining the populations of the sales orders, customer orders, or sales invoices would not tell the auditor if goods were shipped without being invoiced.
  19. To identify unrecorded trade accounts payable, the auditor should ------------------------------------------ to determine whether the related payables apply to the prior period. Using ----------------------------provides evidence about conditions that existed at the balance sheet date.
    To identify unrecorded trade accounts payable, the auditor should review subsequent cash disbursements to determine whether the related payables apply to the prior period. Using subsequent transactions provides evidence about conditions that existed at the balance sheet date.
  20. Generally, --------------------------- are reported at the conclusion of the audit. However, because timely communication may be important, the auditor may choose to communicate significant matters during the course of the audit. Therefore, an auditor may communicate ------------------------------------ during an audit or after the audit's completion.
    Generally, significant deficiencies are reported at the conclusion of the audit. However, because timely communication may be important, the auditor may choose to communicate significant matters during the course of the audit. Therefore, an auditor may communicate significant deficiencies during an audit or after the audit's completion.
  21. A written management representation that management has made available ------------------------------------------- should be obtained by the auditor.
    A written management representation that management has made available all financial records and related data should be obtained by the auditor.

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