Assignment ( NB01 )

Chapter 10

INTERNAL CONTROL AND CONTROL RISK

Integrated  1

Ketua               : Pandam Rukmi Wulandari (20207845)

Anggota           :  Delvita Dita Putri Anggrayni (20207269)

Shelly Huzaynah (21207019)

Sri Wahyu Handayani (21207047)

Windy Atmawardani Rachman (21207174)

Object              : Manufacturing Accounts Payable Department

Client               : Anthony CPA

click here to find the answer

Assignment ( NAO1)

Assignment

Chapter 14

AUDIT SAMPLING FOR TEST OF CONTROL AND SUBSTANTIVE TEST OF TRANSACTION

14-29

Questions :

Objective 14-5, 14-7 , the questions below relate to determine the CUER in audit sampling for tst of control, using the following table :

	1	2	3	4	5	6	7	8
ARACR (in percent )	10	5	5	5	5	5	5	5
Populations size	5.000	5.000	5.000	5.000	500	900	5.000	500
Sample Size	200	200	500	20	100	100	100	25
Number of exception	4	4	1	4	2	10	0	0

Required

a. Using non statistical sampling calculated TER-SER for each of columns 1 through 8 and evaluate whether or not sampling error is large enough to accept the population. Assume that TER  is 5% for each column

b. For each of the columns 1 through 8, determine CUER using attributes sampling from the appropriate table

c. Using your understanding of the relationship between the four preceding factors and the CUER, state the effect on the CUER ( Increase or decrease ) of changing each of the following factor while the other three held constants :

-          A decrease in the ARACR

-          A decrease in the population size

-          A decrease in the sample size

-          A decrease in the number of exceptions in the sample

d. Compare your answer in part with the results you determined in part a ( non statistical sampling ) or part b ( attribute sampling ). Which of the factor appears to have the greatest effect on the CUER ? which one  appears to have the least effect ?click   here find the answer

Assignment ( NAO1)

Assignment

Chapter 14

AUDIT SAMPLING FOR TEST OF CONTROL AND SUBSTANTIVE TEST OF TRANSACTION

14-28

Questions :

The Following questions concern the determination of the proper sample size in audit sampling using the following table :

	1	2	3	4	5	6	7
ARACR (in percent )	10	5	5	5	10	10	5
TER	6	6	5	6	20	20	2
EPER (in percent)	2	2	2	2	8	2	0
Population size	1.000	100.000	6.000	1.000	500	500	1.000.000

Required :

a. Assume that the initial sample size for column 1 was determined to be 90 items , using non statistical sampling. For each of columns 2 through 7, use you judgment to decide  the appropriate non statistical  sample size. In deciding each sample size, consider the effect of  changes in each of the four factors (ARACR, TER, EPER, and population size ) compared with column 1.

b. For each of the column numbered 1 through 7, determine the initial sample size needed to satisfy the auditor’s requirements using attributes sampling from the appropriate  part of table 14-

c. Using you understanding of the relationship between the following factors and sample size, state the effect on the initial sample size (increase decrease ) of the changing each of the following factors while the other three are held constant :

-          An increase in ARACR

-          An increase in the TER

-          An increase in the EPER

-          An increase in the population size

d. Explain  why there is such a large difference in the sample size for columns 3 and 6

e. Compare your answer in part with the results you determined in part a ( non statistical sampling ) or part b ( attribute sampling ). Which of the four factor appears to have the greatest effect on the initial sample size ? which on appears to have the least effect

f. Why is the sample size called the initial sample size ? Click here to find the answer

The Impact of Information Technology on the Audit Process

Internet Problem ( NAO1)

Questions :

1. 1. How does IT governance fit into an organization’s overall governance?
2. 2. The Executive Summary makes five recommendations for management with respect to IT. What are these recommendations?
3. How would an auditor likely view a company’s IT environment if the organization had implemented the above recommendations? click here

Fraud Auditing

Internet Problem ( NAO1)

Questions :

1. What are three common pitfalls that should be avoided during brainstorming sessions? How can these problems be avoided ?

2. What are three important techniques to improve the effectiveness of a brainstorming session? click here

Section 404 Audits of Internal Control and Control Risk

Internet Problem ( NAO1)

Questions :

1. Use EDGAR to search for Tri-Valley Corporation (TVC) and Monarch Staffing Inc. Find TVC’s 10-K and Monarch’s 10-KSB for the year ended 12-31-06.
2. Did either company report material weaknesses in ICFR? If so, what were the weaknesses? Click here 1 or  2
   

Materiality and Risk

Internet Problem ( NAO1)

Questions :

Imagine that you are employed as an auditor in a CPA firm that performs the audit of Microsoft. Your firm’s materiality guidelines indicate that overall engagement materiality should be set at an amount between five and ten percent of income before taxes.

a.  Apply your firm’s guidelines to Microsoft’s 2003 financial statements. What percentage of income before taxes do you believe is appropriate? Why? What do you believe overall engagement materiality should have been for 2003?

b.  Given Microsoft’s 2003 balance sheet, what asset line items would be allocated the highest amount of tolerable misstatement? Why?click here

Audit Planning and Analytical Procedures

Internet Problem ( NAO1)

Questions :

Internet Problem 8-1 (Industry Research and Client Acceptance)

The vignette at the beginning of Chapter 6 in the text contains a brief description of the ZZZZ Best fraud. One area where the auditors were particularly criticized in that audit had to do with the auditors’ lack of industry knowledge. With hindsight it appeared that the fraud should have been easily detected because ZZZZ Bests’ large restoration contracts were in excess of $7 million while the largest restoration jobs on record in the insurance restoration industry were less than $3 million.

You have been approached by On the Sunny Side, a team sports uniform designer and manufacturer for women, about performing the company’s financial statement audit. The company began operations eight years ago and has experienced strong growth in the last several years. Teri Kloth, the chief executive officer, has told you that her company expects production in 2004 to be 450,000 units. She also provided summary historical financial and operating data regarding unit sales. In   2002 and 2003, the company reported sales of 365,000 and 402,000 units, respectively.

Are On the Sunny Side’s 2002 and 2003 unit sales reasonable? Why or why not? (Hint: Visit the U.S. Census Bureau’s web site. Once you are at the site, go to the “Business” section and then to the “Manufacturing” sector-specific data section. Once you are there, locate the Current Industrial Reports. Next search the CIRs by Subject Title for Apparel. Data about women’s team sports uniforms can be found by search for “Apparel.” Use the most current annual report for your analysis. click here

Audit Evidence

Internet Problem ( NAO1)

Questions :

1. Read about ACL’s solution for data quality and fraud detection. How might an auditor use ACL’s data analytics software for these two purposes?
2. How might ACL be used by a company to comply with the requirements related to internal control over financial reporting? Hint: Take a look at ACL’s Continuous Controls Monitoring software. Click here
   

Audit Responsibilities and Objectives

Internet Problem ( NAO1)

Questions :

1. Read the statements issued by the PCAOB and SEC on May 16, 2005 and briefly describe the apparent underlying cause(s) for auditors’ failure in applying the concept of reasonable assurance. Hint: Read the portion of the PCAOB’s policy statement entitled “The Importance of Professional Judgment.”
2. Why do you think firms had such difficulty in applying the concept of reasonable assurance during the first year of implementation of Section 404?click here