Oceanview assignment 5

Discussion questions

1. For this assignment, the expected population exception rate (EPER) was specified as 1% or 2%, the tolerable exception rate (TER) was specified as 7% or 8, and the acceptable risk of overreliance (ARO) was specified as 10% for all attributes in the audit of acquisitions transactions. Indicate how each of these variable (EPER, TER, and ARO) should be determined. What is the effect on sample size of lowering each variable (EPER, TER, and ARO)?

1. When the computed upper exception rate (CUER) exceeds the tolerable exception rate (TER), the auditor will likely increase the assessed level of control risk and increase one or more related substantive tests.What other courses of action are available to the auditor when CUER exceeds TER?

1. The study and evaluation of internal controls in Assignment 4 identified deficiencies in internal controls over acquisitions. Did any of these deficiencies in misstatements in the recording of transactions? Explain why deficiencies in internal controls might not always result in significant misstatements when transactions are recorded.

1. You performed tests of controls and substantive tests of transactions for acquisitions using nonstatistical sampling. The test of controls and substantive tests of transactions for sales transactions were performed using statistical sampling. Indicate the significant differences in these approaches in planning the sample, performing the audit procedures, and evaluating the results of the sample.