Strategies and decisions are taken at various hierarchal levels in an organization. Explain different levels of hierarchy in organisations and discuss the various Strategic decisions taken at these different levels of hierarchy. Explain these hierarchical levels and decisions.

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You are the experienced assistant auditor for the audit of Technology Inc. (the "Company"), whose audit is subject to the standards of the AICPA. Your engagement team has identified risks of material misstatement related to the existence, valuation and allocation, and rights and obligations assertions of accounts receivable, specifically the risks of material misstatement that the client has recorded in sales and accounts receivable for sales and shipments that are not valid or are recorded at the incorrect amount. The total balance of accounts receivables is $1,118,517 rounded to $1,119,000. Your field senior has assigned you to test the accounts receivable balance by sampling and confirming balances with individual customers, which is a common audit test to address these risks of material misstatement. As part of your risk assessment procedures, you obtained an understanding of the Company's accounting policy, processes, and controls regarding the accounts receivable balance by performing procedures (including inquiries of management and process owners) and walkthroughs of the processes related to accounts receivable. As a result of these procedures, you understand that the accounts receivables balance is relatively homogeneous and consists of a high volume of low-dollar value transactions. You decide to use data analytics to obtain fact-based evidence and to corroborate your understanding of the accounts receivables balance. On the basis of your analysis, you identified one statistical outlier of $300K, while the remaining balance aggregated to $800K, which is made up of approximately 80 homogeneous transactions. Upon further inquiries about the $300K transaction above, you determined that it is a related-party transaction. On the basis of your analysis of the accounts receivable balance, you define the customer balance as the sampling unit. You determine that any balances greater than performance materiality (Tolerable misstaement) of $258K should be selected for testing and therefore select the $300K related-party transaction as a judgemental selection. You then determine that you would use PPS statistical sampling to test the remaining population. The other relevant factors are as follows: · Performance materiality (Tolerable Misstatement) is $258 thousand. Clearly trivial threshold (De Minimis Materiality) is $12,906. The population size, excluding the $300 thousand selected balance, is $819 thousand (no other items are above performance materiality). · The Inherent level of risk is determined to be "Higher/High." You are relying on the operating effectiveness of internal controls and therefore Control Risk is determined to be LOW. · Combined Risk of Inherent and Control Risk (AKA Risk of Material Misstatement "RMM") is determined to be Moderate. You determined that the "risk that other substantive procedures will fail to detect a material misstatement" is moderate. The client provided the accounts receivable population to you in electronic format. Through the use of data analytics, you noted that the population had similar, positive value characters. Q4-ii. Should any errors be extrapolated over the entire population given that the only identified error relates to Confirmation 3 and Confirmation 4? Explain why briefly (1-2 sentences). Confirmation Extrapolate Error: [(A) Yes- Extrapolate, (B) No- No Extrapolation required ]- (Explain why briefly.) Number EX: (A)- Because XXX] 2 Q4-iv. Calculate the Audited Value using the Ration & Difference Estimation Methods - Look to the "Case Facts" Tab & Q4-i above for information you need for the formulas. -Formulas are included below (scroll down) for convenience. - Number of sampled items is listed aboce in Q4i -Number of items in the population is listed in the "Case Facts" tab. Show all work below. FILL IN THE BOXES HIGHLIGHTED YELLOW WITH YOUR ANSWER. ANSWER: Use the tables below to calculate. Audited amount (based on Recorded Balance Bases of Strata extrapolation of confirmation Strata (rounded) Difference results) [Book Value] [Audit Value] Ratio Method Representative Homogeneous Population 2 High Dollar Value Items TOTAL FULL POPULATION $819,000 $819,000 $300,000 $300,000 S1,119,000 $0 $1,119,000 Audited amount (based on extrapolation of confirmation results) [Audit Valuc| Recorded Balance Strata Bases of Strata (rounded) [Book Valuel Difference Difference Estimation Representative Homogencous Population 2 High Dollar Value Items TOTAL FULL POPULATION $819,000 $819,000 Method $300,000 $300,000 S1,119,000 so $1,119,000 Q4-v. Assume that the following final results of the Sample (See table below), determine whether (a)there is a material misstatement, or (b) whether the sample passes; briefly (1-2 sentences): [Assume Materiality is the same as that per the case facts) Explain why Q4-v. Assume that the following final results of the Sample (See table below), determine whether (a)there is a material misstatement, or (b) whether the sample passes; & Explain why briefly (1-2 sentences): [Assume Materiality is the same as that per the case facts) ANSWER: (EX: (a)there is a material misstatement - because XXX.) Note: Projected Misstatement = Estimated Misstatement Estimated Audit Value = Projected Audit Value • Ratio Estimation: • Proi. Misstmt: Estimated Misstatement = BV (of Strata) - Projected AV (of Strata) • Audit Value: Projected Audit Value = [AV of Sample ["BV of sample X BV of population •Difference Estimation • Proj. Misstmt: Projected Misstatement = [ Sample AV- Sample BV*] X Population Items Sample Items * Sample Audit Value - Sample Book Value= Sample net misstatement • Audit Value: Estimated Audit Value= Book Value of Strata + Projected Misstatement Definition/ Key: BV= Book Value I AV= Audit Value I AV, = Audit Value of total population I BV, = Book Value of total population I Avn1 = Audit Value of Sample (or strata 1) I Bvn1 = Book Value of Sample (or strata 1) I n = Size of Sample (# of items in sample) I N = Size of Population (# of items in population) You are the experienced assistant auditor for the audit of Technology Inc. (the "Company"), whose audit is subject to the standards of the AICPA. Your engagement team has identified risks of material misstatement related to the existence, valuation and allocation, and rights and obligations assertions of accounts receivable, specifically the risks of material misstatement that the client has recorded in sales and accounts receivable for sales and shipments that are not valid or are recorded at the incorrect amount. The total balance of accounts receivables is $1,118,517 rounded to $1,119,000. Your field senior has assigned you to test the accounts receivable balance by sampling and confirming balances with individual customers, which is a common audit test to address these risks of material misstatement. As part of your risk assessment procedures, you obtained an understanding of the Company's accounting policy, processes, and controls regarding the accounts receivable balance by performing procedures (including inquiries of management and process owners) and walkthroughs of the processes related to accounts receivable. As a result of these procedures, you understand that the accounts receivables balance is relatively homogeneous and consists of a high volume of low-dollar value transactions. You decide to use data analytics to obtain fact-based evidence and to corroborate your understanding of the accounts receivables balance. On the basis of your analysis, you identified one statistical outlier of $300K, while the remaining balance aggregated to $800K, which is made up of approximately 80 homogeneous transactions. Upon further inquiries about the $300K transaction above, you determined that it is a related-party transaction. On the basis of your analysis of the accounts receivable balance, you define the customer balance as the sampling unit. You determine that any balances greater than performance materiality (Tolerable misstaement) of $258K should be selected for testing and therefore select the $300K related-party transaction as a judgemental selection. You then determine that you would use PPS statistical sampling to test the remaining population. The other relevant factors are as follows: · Performance materiality (Tolerable Misstatement) is $258 thousand. Clearly trivial threshold (De Minimis Materiality) is $12,906. The population size, excluding the $300 thousand selected balance, is $819 thousand (no other items are above performance materiality). · The Inherent level of risk is determined to be "Higher/High." You are relying on the operating effectiveness of internal controls and therefore Control Risk is determined to be LOW. · Combined Risk of Inherent and Control Risk (AKA Risk of Material Misstatement "RMM") is determined to be Moderate. You determined that the "risk that other substantive procedures will fail to detect a material misstatement" is moderate. The client provided the accounts receivable population to you in electronic format. Through the use of data analytics, you noted that the population had similar, positive value characters. Q4-ii. Should any errors be extrapolated over the entire population given that the only identified error relates to Confirmation 3 and Confirmation 4? Explain why briefly (1-2 sentences). Confirmation Extrapolate Error: [(A) Yes- Extrapolate, (B) No- No Extrapolation required ]- (Explain why briefly.) Number EX: (A)- Because XXX] 2 Q4-iv. Calculate the Audited Value using the Ration & Difference Estimation Methods - Look to the "Case Facts" Tab & Q4-i above for information you need for the formulas. -Formulas are included below (scroll down) for convenience. - Number of sampled items is listed aboce in Q4i -Number of items in the population is listed in the "Case Facts" tab. Show all work below. FILL IN THE BOXES HIGHLIGHTED YELLOW WITH YOUR ANSWER. ANSWER: Use the tables below to calculate. Audited amount (based on Recorded Balance Bases of Strata extrapolation of confirmation Strata (rounded) Difference results) [Book Value] [Audit Value] Ratio Method Representative Homogeneous Population 2 High Dollar Value Items TOTAL FULL POPULATION $819,000 $819,000 $300,000 $300,000 S1,119,000 $0 $1,119,000 Audited amount (based on extrapolation of confirmation results) [Audit Valuc| Recorded Balance Strata Bases of Strata (rounded) [Book Valuel Difference Difference Estimation Representative Homogencous Population 2 High Dollar Value Items TOTAL FULL POPULATION $819,000 $819,000 Method $300,000 $300,000 S1,119,000 so $1,119,000 Q4-v. Assume that the following final results of the Sample (See table below), determine whether (a)there is a material misstatement, or (b) whether the sample passes; briefly (1-2 sentences): [Assume Materiality is the same as that per the case facts) Explain why Q4-v. Assume that the following final results of the Sample (See table below), determine whether (a)there is a material misstatement, or (b) whether the sample passes; & Explain why briefly (1-2 sentences): [Assume Materiality is the same as that per the case facts) ANSWER: (EX: (a)there is a material misstatement - because XXX.) Note: Projected Misstatement = Estimated Misstatement Estimated Audit Value = Projected Audit Value • Ratio Estimation: • Proi. Misstmt: Estimated Misstatement = BV (of Strata) - Projected AV (of Strata) • Audit Value: Projected Audit Value = [AV of Sample ["BV of sample X BV of population •Difference Estimation • Proj. Misstmt: Projected Misstatement = [ Sample AV- Sample BV*] X Population Items Sample Items * Sample Audit Value - Sample Book Value= Sample net misstatement • Audit Value: Estimated Audit Value= Book Value of Strata + Projected Misstatement Definition/ Key: BV= Book Value I AV= Audit Value I AV, = Audit Value of total population I BV, = Book Value of total population I Avn1 = Audit Value of Sample (or strata 1) I Bvn1 = Book Value of Sample (or strata 1) I n = Size of Sample (# of items in sample) I N = Size of Population (# of items in population)

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Strategies and decisions are taken at various hierarchal levels in an organization Explain different levels of hierarchy in organisations and discuss ... View the full answer