Which of the following best describes the use of sampling and ADA in performing audit procedures Question 2 options: Statistical sampling and ADA eliminate the need for significant judgment in performing substantive tests. Sampling is examining less than 100% of the population with complete testing while ADA is examining 100% of the population partially. Sampling and ADA may both be used to perform analytical procedures, test controls, and perform substantive procedures. Audit guidance requires the use of statical sampling but not use of ADA in performing substantive procedures.
Added by Dennis K.
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Sampling involves selecting a subset of items from a population to draw conclusions about the entire population, while ADA refers to the use of data analysis techniques to evaluate and interpret data in the audit process. Show more…
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The CAE of HVR Company has asked you to explain the fundamental differences between statistical and nonstatistical sampling in a manner that will help him make an informed decision about the nature of the sampling training that his internal audit staff needs. Explain to the CAE how the two sampling approaches differ with respect to: a. Sample size determination. b. Sample selection. c. Evaluating sample results. You and a friend are studying audit sampling together. Your friend is having a hard time understanding the various aspects of risk associated with attribute sampling and has put together the following list of questions she wants to discuss with you. Answer each question. a. What is: â– Audit risk? â– Inherent risk? â– Control risk? â– Controllable risk? â– Residual risk? b. What is sampling risk? How is sampling risk controlled? c. What are the two aspects of sampling risk that an internal auditor is concerned with when testing controls? Briefly describe each aspect. d. What is nonsampling risk? How is nonsampling risk controlled? AVF Company processes an average of 400 vouchers payable every month. Each voucher package contains a copy of the check disbursed and supporting documents such as vendor invoices, receiving reports, and purchase orders. The internal auditor plans to examine a sample of vouchers listed in the voucher register using attribute sampling to evaluate the effectiveness of several controls. The attributes of interest include: â– Agreement of voucher amounts with invoice amounts. â– Voucher canceled after payment. Based on experience, the auditor expects a deviation rate of 2 percent for the first attribute and 1 percent for the second. He decides on a tolerable deviation rate of 7 percent for the first attribute and 6 percent for the second. He sets the risk of assessing control risk too low at 5 percent. Assume that the auditor's tests uncovered two occurrences of voucher amounts not agreeing with invoice amounts and two occurrences of vouchers not being canceled after payment. a. Complete the following schedule. (Note: round sample size per table up to next number ending in zero for sample size used.) b. Evaluate the sample results for the two attributes. Your answer should include: â– A statistical conclusion for each attribute. â– The audit decision you would make based on the quantitative sample results for each attribute.
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Which of the procedures provides the highest level of assurance? A. Performing a year over year flux analysis to identify variances over 10% for fixed asset amortization expense, with all fixed asset categories reviewed together (i.e., at the financial statement line item level). B. Inquiry of management about changes in the level of sales revenue during the period based on our leadsheet analysis. C. Testing a judgmental sample of 5 items selected randomly from a large population, which represents less than 10% of total monetary balance of the population. D. SAP performed to directly address the risk of material misstatement being tested with a moderately precise expectation (based on information from independent sources) and variance threshold not greater than 2x TE.
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