Case Study $1$: ACME Limited

Dianne Lochan is a senior auditor with Bella Buster and Associates $($Bella Buster$),$ an external auditing firm based in Oshawa.

Dianne is currently working on the audit of the accounts receivable of Acme Limited $($Acme$),$ one of Bella Buster$$s clients.

$$During the risk assessment stage, Dianne conducted an audit data analytic using data provided directly by Acme, by grouping Accounts Receivable by days overdue to assess the risk of the accuracy, valuation, and allocation assertion and an overstatement of accounts receivable.

During the past few weeks, Dianne $$conducted interviews with Acme$$s accounts receivable manager, its CFO, and the staff working in the accounts receivable department.

Dianne has also overseen the external confirmations of accounts receivable, $30$ percent of which required the recipient to respond as to whether or not the amount stated was correct.

Dianne also conducted a review of subsequent cash receipts from Acme$$s customers. She vouched a sample of accounts receivable balances back to the underlying invoices, cash receipts, and sales returns, and traced a sample of these documents to the accounts receivable ledger.

Required

List the types of audit evidence gathered by Dianne and comment on the persuasiveness of each type.

Link each type of evidence to the relevant accounts receivable assertions.

Case Study $2$: Sampling

Part $($a$)$

Match the numbered situations below with one of the following types of audit sampling or sampling risk: Statistical sampling or non$-$statistical sampling. Sampling risk, Non$-$sampling risk:

Rather than looking only for authorized signatures, an auditor checked to see if there were any signatures in the credit approval box on a sample of sales orders.

An auditor concluded that, based on a statistical sample, the client$$s control system was working acceptably when, in fact, the population deviation rate was unacceptable.

Using the laws of probability, an auditor selected a sample and evaluated the results of her sample.

Part $($b$)$

Karina, a first$-$year auditor, is asked to select a sample of invoices to audit the utility expense account. Below is the account detail.

$$

Month

Balance

Month

Balance

January

$$15,245$

July

$ $2,901$

February

$12,973$

August

$2,837$

March

$11,359$

September

$3,690$

April

$9,326$

October

$5,890$

May

$6,380$

November

$9,823$

June

$4,558$

December

$14,906$

$$

The audit program asks to select a sample of four items.

$$

Required

Using systematic selection, determine which four months will be selected.

Using haphazard selection, determine which four months will be selected.

Using block selection, determine which four months will be selected.

$$

$\backslash$begin$\{$tabular$\}\{|$crcr$|\}$

$\backslash$hline Month & Balance & Month & Balance $\backslash \backslash$

$\backslash$hline January & $\backslash (\backslash$$ $15,245\backslash )$ & July & $\backslash (\backslash$$ $2,901\backslash )\backslash \backslash$

$\backslash$hline February & $12,973$ & Auqust & $2,837\backslash \backslash$

$\backslash$hline March & $11,359$ & September & $3,690\backslash \backslash$

$\backslash$hline April & $9,326$ & October & $5,890\backslash \backslash$

$\backslash$hline May & $6,380$ & November & $9,823\backslash \backslash$

$\backslash$hline June & $4,558$ & December & $14,906\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$