Questions from new lessons

Question 1

A3 M8
In assessing the tolerable rate of deviations of a test of controls that was performed using the statistical sampling, an auditor should consider that:

Deviations from pertinent controls at a given rate ordinarily result in misstatements at a lower rate ????

Answer 1

explain from Becker:
Sometimes the control is not working but that does not mean there is a dollar misstatements. Therefore, the actual misstatement rate could be lower than the control deviation rate.

Question 2

The use of the ratio estimation sampling as compared to other sampling techniques is most effective when:

Answer 2

The calculated audit amounts are approximately proportional to the client’s book amounts.

Explain: Ratio estimation is most effective if there is a correlation between book values and audit amounts.

Question 3

which of the following procedures would assist to identify litigation, claims, and assessments?

Answer 3

Read the file of correspondence from taxing authorities ( note: inspect checks included with the client’s cutoff bank statement doesn’t help, it just provides some indication of money paid near year end date)

Question 4

A control deficiency in design occurs when a necessary control is missing or when an existing control does not achieve the desired objective.

Answer 4

The fact that employee A has both the custody and recording functions is a lack of segregation of duties, which is a deficiency in the design of the internal control.