Binu is performing tests of controls in the purchases cycle of Oakland Hardware Company. Based on the
Question:
Binu is performing tests of controls in the purchases cycle of Oakland Hardware Company. Based on the audit firm guidelines, a sample size of 50 purchases is selected from the cash disbursements file. The following summarizes Binu’s results of two of his tests:
REQUIRED
a. If the controls that Binu was testing were not effective, what would be the potential misstatement?
b. Complete the table below to evaluate Binu’s results. Because internal controls were considered effective, Binu used a low ARO (Acceptable Risk of Overeliance), a zero EPER (Estimated Population Error Rate), and a 5 percent TER (Tolerable Exception Rate) for each attribute.
Step by Step Answer:
Auditing The Art And Science Of Assurance Engagements
ISBN: 9780136692089
15th Canadian Edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan, Joanne C. Jones