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Interval Intersection for Invoice Formula in Excel

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					                                                                     CHAPTER 13
AUDIT SAMPLING
Learning Check

13-1. No. Audit sampling is applicable to both tests of controls and substantive tests.
      However, it is not equally applicable to all auditing procedures. For example, it is
      widely used in vouching, confirming, and tracing, but it is ordinarily not used in
      inquiring, observing, and analytical procedures.

13-2. a.       Sampling risk relates to the possibility that a properly drawn sample may not
               be representative of the population from which it is drawn. Nonsampling risk
               refers to the portion of audit risk that is not due to examining only a portion of
               the data.

        b.     There are two types of sampling risks for tests of controls and two for
               substantive tests. The types of sampling risk and their potential effects on the
               audit are:

               Tests of controls:
                The risk of assessing control risk too low is the risk that the assessed level
                  of control risk based on the sample supports the planned assessed level of
                  control risk when the true operating effectiveness of the control structure
                  policy or procedure, if known, would not be considered adequate to
                  support the planned assessed level.
                The risk of assessing control risk too high is the risk that the assessed level
                  of control risk based on the sample does not support the planned assessed
                  level of control risk when the true operating effectiveness of the control
                  structure policy or procedure, if known, would be considered adequate to
                  support the planned assessed level.

               Substantive tests:
                The risk of incorrect acceptance is the risk that the sample supports the
                  conclusion that the recorded account balance is not materially misstated
                  when it is materially misstated.
                The risk of incorrect rejection is the risk that the sample supports the
                  conclusion that the recorded account balance is materially misstated when
                  it is not materially misstated.

               The risk of assessing control risk too low and the risk of incorrect acceptance
               relate to audit effectiveness. The risk of assessing control risk too high and the
               risk of incorrect rejection relate to the efficiency of the audit.

13-3.   a.     Both nonstatistical and statistical sampling (1) require the exercise of
               judgment, (2) can provide sufficient evidential matter required by the third
               standard of field work, and (3) are subject to some sampling and nonsampling
               risk. The critical difference is that the laws of probability are used to measure
               and control sampling risk in statistical sampling.

       b.      Statistical sampling benefits the auditor in (1) designing an efficient sample,
               (2) measuring the sufficiency of the evidence obtained, (3) evaluating sample
               results, and (4) quantifying and controlling sampling risk.

13-4. a.       The types of statistical sampling techniques used in auditing are attribute
               sampling and variables sampling.

       b.      Attribute sampling is used in tests of controls to estimate the rate of deviations
               from prescribed controls in a population. Variables sampling is used in
               substantive tests to estimate the total dollar amount of a population or the
               dollar amount of error in a population.

13-5. a.       The primary purpose of a test of controls is to estimate the rate of deviations
               from prescribed controls in a population. For example, the auditor wants to
               estimate the percentage of the time that a specific internal controls fails to
               function as designed.

      b.       The primary purpose of a substantive test is to estimate the total dollar amount
               of a population or the dollar amount of error in a population. For example,
               the auditor wants to estimate the amount by which total accounts receivable
               might be misstated and determine whether the potential misstatement is
               material to the financial statements.

13-6. The concepts associated with audit sampling does not apply to the following tests of
      controls:
       Tests that rely primarily on inquiry and observation. (e.g., many tests of the
         control environment, tests of segregation of duties, or observation of physical
         controls).
       Tests of computer application controls because they can test a programmed
         decision point with only two elements of test data (one test to determine that the
         control appropriately accepts transactions that meet the control criteria and one to
         see that it appropriately rejects transactions that fail to meet control criteria).
       Tests of computer application controls that may show exceptions on a computer
         screen and prevent further processing of a transaction (Tested with inquiry and
         observation, and by submitting transactions that may generate expected error
         messages).

13-7. a.       Five types of control procedures where the auditor is likely to use some form
               of nonstatistical sampling for tests of controls include: (1) programmed control
               procedures, (2) computer general control procedures, (3) manual follow-up of
               exceptions identified by programmed controls, (4) management performance
               reviews, and (5) controls over management discretion in financial reporting.
               Other examples might include controls over management’s use of
               spreadsheets in the financial reporting process, or tests of the control
               environment.
         b.       When testing programmed control procedures the auditor usually want to
                  know that the key aspect of the program (1) processed transactions that met
                  that criteria of the control procedures and should be processed and (2) rejected
                  transactions that did not meet the criteria of the control procedures and should
                  not be processed. When using CAATs, such as test data, it is sufficient to test
                  each condition.

         c.       If the auditor wants to assess control risk as low based on a programmed
                  control procedure the auditor will usually (1) directly test the programmed
                  control procedures using CAATS, (2) test computer general control
                  procedures to gain assurance that the programmed control functioned
                  effectively over time, and (3) test the effectiveness of manual follow-up of
                  exceptions identified by the programmed control procedure.

13-8. The following table outlines the steps in a nonstatistical sampling plan for tests of
       controls and identifies the professional judgment(s) involved in each step.

                         Step                                               Professional Judgment
1.   Determine the objectives of the test of controls     Determine audit objectives and how the objectives of
                                                          the test relate to financial statement assertions.
2.   Determine procedures to evaluate internal controls   The determination of procedures is a matter of
                                                          professional judgment that provides evidence about
                                                          the effective design and operation of internal controls.
3.   Make a decision about the audit sampling             The choice of using statistical or nonstatistical
     technique.                                           sampling is a matter of professional judgment.
4.   Define the population and sampling unit.             The population depends on the control being tested.
                                                          In many cases, there may be several ways to identify
                                                          different sampling units for the same control (e.g.,
                                                          each report or each item on a report).
5.   Use professional judgment to determine sample        Sample size is a function of a variety of factors. The
     size.                                                auditor uses professional judgment to make a decision
                                                          about each judgment that influences sample size. If
                                                          the auditor uses nonstatistical sampling the auditor
                                                          also uses professional judgment to determine the
                                                          sample size used.
6.   Select a representative sample.                      The auditor uses professional judgment in determining
                                                          the technique used to select a representative sample
                                                          from the population.
7.   Apply audit procedure.                               In step 2 the auditor used professional judgment to
                                                          determine the procedures to be performed. Now the
                                                          auditor uses judgment to apply those procedures to
                                                          each sampling unit. Judgment is necessary to
                                                          determine if evidence supports a control deviation or
                                                          whether the control functioned effectively.
8.   Evaluate the sample results.                         The auditor uses professional judgment to sum the
                                                          sample results and project the sample results on the
                                                          population, particularly in a nonstatistical sample.
9.   Document conclusions                                 Professional judgment is an integral part of
                                                          documenting the audit conclusions about effective
                                                          operation of a control based on sample results.
13-9. The following discussion explains each factor that influences sample size.
      1.      The nature of the control. Management’s review of weekly expenditure
              reports is a manual control and should be tested more extensively than an
              automated control.
         2.       The frequency of operation of the control. The control operates weekly and
                  would be tested less extensively than controls that operate daily or on every
                  transaction.
         3.       The importance of the control. If management’s review of weekly
                  expenditure reports is critical to the audit strategy, it needs to be tested more
                  extensively than if the control is only tangential to the audit strategy.
         4.       The risk of assessing control risk too low. The smaller the amount of
                  sampling risk the larger the sample size.
         5.       Tolerable deviation rate. The smaller the rate of deviation (inappropriate or
                  inadequate review of weekly reports) from the proscribed control procedure
                  that the auditor can tolerate, the larger the sample size.
         6.       Expected population deviation rate. The closer the tolerable deviation rate
                  and the expected deviation rate are to each other, the larger the sample size.
         7.       Population size. For small population sizes, such as a weekly control activity,
                  sample size decrease as the population size decreases.

13-10. In a few instances the logic behind audit sampling does not apply to substantive tests.
       For example, audit sampling does not apply to:
              Initial procedures,
              Substantive analytical procedures,
              Many tests of details of accounting estimates, and
              Many tests of details of disclosures.

13-11. The following table outlines the steps in a nonstatistical or statistical sampling plan
       for substantive tests and identifies the professional judgment(s) involved in each step.

                         Step                                             Professional Judgment
1.   Determine the objectives of the substantive test   Determine audit objectives and the objectives of the
                                                        test relate to financial statement assertions.
2.   Determine substantive audit procedure to perform   The determination of substantive audit procedures is a
                                                        matter of professional judgment that provides
                                                        evidence about the potential amount of misstatement
                                                        in an account.
3.   Make a decision about the audit sampling           The choice of using statistical or nonstatistical
     technique.                                         sampling is a matter of professional judgment.
4.   Define the population and sampling unit.           The population depends on the account balance being
                                                        evaluated. In many cases, there may be several ways
                                                        to identify different sampling units for the same
                                                        account balance (e.g., each customer or each sales
                                                        invoice receivable from a customer).
5.   Use professional judgment to determine sample      Sample size is a function of a variety of factors. The
     size.                                              auditor uses professional judgment to make a decision
                                                        about each judgment that influences sample size. If
                                                        the auditor uses nonstatistical sampling the auditor
                                                        also uses professional judgment to determine the
                                                        sample size used.
6.   Select a representative sample.                    The auditor uses professional judgment in determining
                                                        the technique used to select a representative sample
                                                        from the population.

7.   Apply audit procedures.                            In step 2 the auditor used professional judgment to
                                                        determine the procedures to be performed. Now the
                                                        auditor uses judgment to apply those procedures to
                                                        each sampling unit. Judgment is necessary to
                                                    determine if evidence is present of a misstatement in
                                                    the amount of the balance or transaction tested.
8.   Evaluate the sample results.                   The auditor uses professional judgment to sum the
                                                    sample results and project the sample results on the
                                                    population, particularly in a nonstatistical sample.
9.   Document conclusions                           Professional judgment is an integral part of
                                                    documenting the audit conclusions about the potential
                                                    for material misstatement in the financial statements.

13-12. a.         The inventory population can be defined as (1) all inventory irrespective of
                  location, or (2) all inventory in the warehouse and then all inventory at retail
                  locations, or (3) each location may be treated as a separate population.

         b.       The sampling unit could be defined as each stock number (irrespective of
                  location), or each stock number at each location, or it could be defined in
                  terms of physical location, such as bin number, or rack in a retail store.

13-13. The AICPA’s Audit Sampling Guide (pp. 68–69) identifies several advantages and
       disadvantages of PPS sampling. The advantages of PPS sampling are:
        It is generally easier to use than classical variables sampling because the auditor
           can calculate sample sizes and evaluate sample results by hand or with the
           assistance of tables.
        The size of a PPS sample is not based on any measure of the estimated variation
           of audit values.
        PPS sampling automatically results in a stratified sample because items are
           selected in proportion to their dollar values.
        PPS systematic sample selection automatically identifies any item that is
           individually significant if its value exceeds an upper monetary cutoff.
        If the auditor expects no misstatements, PPS sampling will usually result in a
           smaller sample size than under classical variables sampling.
        A PPS sample can be designed more easily, and sample selection may begin
           before the complete population is available.

         In contrast, PPS sampling has the following disadvantages:
          It includes an assumption that the audit value of a sampling unit should not be less
             than zero or greater than book value. When understatements or audit values of less
             than zero are anticipated, special design considerations may be required.
          If understatements are identified in the sample, the evaluation of the sample may
             require special considerations.
          The selection of zero balances or balances of a different sign (e.g. credit balances)
             requires special consideration.
          PPS evaluation may overstate the ASR when misstatements are found in the
             sample. As a result, the auditor may be more likely to reject an acceptable book
             value for the population.
          As the expected number of misstatements increases, the appropriate sample size
             increases. Thus, a larger sample size may result than under classical variables
             sampling.
         Professional judgment should be exercised by the auditor in determining the
         appropriateness of this approach in a given audit circumstance.
13-14. a.     The sampling unit in a PPS sample is the individual dollar (the population is
              considered to be a number of dollars equal to the dollar amount o the
              population). The logical sampling unit is the account, document, transaction,
              etc., with which an individual dollar unit selected for inclusion in the sample is
              associated.

       b.     Since the individual dollar is the sampling unit in PPS sampling, the more
              dollars associated with a logical sampling unit the greater its chance of
              selection. Conversely, logical units with zero balances have no chance of
              selection. Therefore, they should be treated separately when using PPS
              sampling. In testing accounts with credit balances, such as liabilities, the
              auditor is usually primarily concerned with understatement. Since PPS
              sampling results in selection proportional to size. The more an item is
              understated, the less its chance of selection. Accordingly, the approach is
              incompatible with the objective.

13-15. a.     The formula for calculating sample size in a PPS sample is:
                                                  BV x RF
                                           n
                                              TM  ( AM x EF )
       b.     Explanations of the factors in the above formula and their effect on sample
              size are:

                                                                      Relationship to
              Factor        Explanation                                Sample Size

              BV            Book value of                             Direct
                            population tested

              RF            Reliability factor for                    Direct (1)
                            specified risk of incorrect acceptance

              TM            Tolerable misstatement                    Inverse

              AM            Anticipated misstatement                  Direct (2)

              EF            Expansion factor for anticipated          Direct
                            misstatement


              (1)      Note that while the relationship between RF and n is direct, the
                       relationship between the risk of incorrect acceptance (which is
                       controlled through the RF factor) and n is inverse.
              (2)      Note that while the relationship between AM and n is direct, the
                       relationship between the risk of incorrect rejection (which is controlled
                       through the AM factor) and n is inverse.

13-16. The specification of anticipated misstatement provides the auditor with a means to
       control the risk of incorrect rejection. The auditor uses prior experience and
       knowledge of the client and professional judgment in determining an amount for
       anticipated misstatement, bearing in mind that an excessively high anticipated
       misstatement will unnecessarily increase sample size while too low an estimate will
       result in a high risk of incorrect rejection.

13-17. The three factors considered in evaluating the result of a PPS sample are (a) the
       projected misstatement determined from the sample, (b) the allowance for sampling
       risk, and (c) the upper misstatement limit.

13-18. The two components of the allowance for sampling risk for PPS samples are (a) basic
       precision and (b) an incremental allowance resulting from any misstatements found.

13-19. A tainting percentage and projected understatement are calculated for each logical
       unit with a book value less than the sampling interval that contains a misstatement.
       The tainting percentage is calculated by dividing the difference between the book and
       audit values by the book value. The tainting percentage is then multiplied by the
       sampling interval to project the degree to which a logical unit is tainted with
       misstatement to all of the dollars in the sampling interval it represents.

       For each logical sampling unit with a book value greater than or equal to the sampling
       interval, projected misstatement is simply the difference between the book value and
       the audit value.

Appendix A
13A-1. a.     The factors that influence sample size for tests of controls using statistical
              attribute sampling are:
                    Risk of assessing control risk too low
                    Tolerable deviation rate
                    Expected population deviation rate
                    Population size when auditing small populations (fewer than 5,000
                      units).

       b.     Some auditors use the same risk of assessing control risk too low for all
              statistical tests of controls. Other auditors vary the risk of assessing control
              risk too low depending on the planned assessed level of control risk, such that
              the lower the planned assessed level of control risk, the lower the risk of
              assessing control risk too low.

       c.     If the auditor plans a “low” assessed level of control risk, the auditor should
              set tolerable deviation rates between 2% and 7%.

       d.     When using a statistical attribute sample the auditor can get a sample size of
              59 with a 5% risk of assessing control risk too low, a 5 percent tolerable
              deviation rate, and a 0% expected deviation rate (assuming a large population
              size).

13A-2. a.     The three steps involved in quantitatively evaluating sample results for a
              statistical test of controls are (1) calculating the sample deviation rate, (2)
              determining the upper deviation limit, and (3) determining the allowance for
              sampling risk.

       b.     The steps involved in using the sample evaluation tables are:
             1.     Select the table that corresponds to the risk of assessing control risk too
                    low.
             2.     Locate the column that contains the actual number of deviations (not
                    the deviation rate) found in the sample.
             3.     Locate the row that contains the sample size used.
             4.     Read the upper deviation limit from the intersection of the column and
                    row determined in steps two and three.

       c.    With a sample size of 59 and one deviation, the auditor can conclude that he or
             she is 95% confident that the maximum deviation rate in the population is not
             more than 7.7%.

13A-3. a.    When evaluating qualitative factor the auditor will want to consider whether
             there is evidence of management override of controls, collusion, or fraud.

       b.    When the sample results do not support the planned assessed level of control
             risk the auditor should increase the final assessed level of control risk to a
             level supported by the sample and decrease the level of detection risk
             associated with substantive tests of details accordingly.

Appendix B
13B-1. a.    The formula for determining sample size in mean-per-unit sampling is:

                                                                  2
                                         N  U R  S xj      
                                      n
                                                             
                                                              
                                              A              

             When the relationship between n and N is greater than .05, a finite correction
             factor is recommended resulting in an adjusted sample size (n') calculated as
             follows:

                                                      n
                                              n 
                                                          n
                                                     1
                                                          N

             b.     The elements in the formula for n given above represent the following:
                    N      =        Population size
                    UR     =        The standard normal deviate for the desired risk of
                    incorrect rejection
                    Sxj    =        Estimated population standard deviation
                    A      =        Planned allowance for sampling risk

             c.     The formula differs for difference and ratio estimation only in the term
                    for the estimated standard deviation. In difference estimation, Sdj (the
                    estimated standard deviation of the differences) is substituted for Sxj. In
                    ratio estimation, Srj (the estimated standard deviation of the ratios) is
                    substituted for Sxj.

13B-2. a.    The risk of incorrect acceptance is controlled in classical variables sampling
             plans by specifying the planned allowance for sampling risk (A) in the sample
               size formula. (A) is determined by multiplying the auditor's specified tolerable
               misstatement (TM) by a ratio (R) of planned allowance for sampling risk to
               tolerable misstatement. The ratio is determined from a table based on the
               auditor's specified risks of incomplete rejection and acceptance.

       b.      Three ways of estimating the standard deviation for a mean-per-unit sampling
               plan are: (1) in a recurring engagement, the standard deviation found in the
               preceding audit may be used, (2) it may be estimated from available book
               values in the current year, and (3) it may be based on the audit values found in
               a presample of 30 to 50 items selected from the current year's population.

13B-3. a.      Planned allowance for sampling risk in a classical variables sampling plan
               provides the means by which the risk of incorrect acceptance is controlled. It
               is found by multiplying the auditor's specified tolerable misstatement by a
               ratio determined from a table based on the specified risks of incorrect rejection
               and acceptance.

       b.      The achieved allowance for sampling risk is calculated from the sample. When
               the achieved allowance is not greater than the planned allowance used to
               determine sample size, it is used to calculate a range, plus and minus, about
               the estimated total population value, if the recorded book value falls within
               this range, the sample results support the conclusion that the book value is not
               materially misstated at a risk of incorrect acceptance not exceeding that
               specified in designing the sample.

       c.      An adjusted achieved allowance for sampling risk is calculated from a sample
               when the achieved allowance is greater than the planned allowance. This
               adjustment is required so that the risk of incorrect acceptance associated with
               the range calculated for the estimated total population value will not exceed
               that originally specified by the auditor.

13B-4. When sample results do not support the book value, the auditor must use professional
       judgment in deciding on an appropriate course of action. If the auditor believes the
       sample is not representative of the population, he or she may expand the sample and
       reevaluate. Also, if the auditor believes the achieved allowance is larger than the
       planned allowance because the sample size was too small (e.g., because the
       population standard deviation used to determine sample size was underestimated), he
       or she may expand the sample and reevaluate. If the auditor believes the population
       book value may be reinstated by more than tolerable misstatement, he or she may
       have the client investigate, and, if warranted, adjust the book value. The auditor
       would then reevaluate the sample results relative to the adjusted book value.

Appendix C
13C-1. Consideration of the same factors in nonstatistical samples as in statistical samples
       may help to produce more efficient and effective samples. However, in nonstatistical
       samples the factors need not be explicitly quantified. The factors to be considered are:
       (1) book value of the population, (2) variation in the population, (3) tolerable
       misstatement, and (4) risk of incorrect acceptance.
13C-2. Two acceptable methods for projecting the misstatement found in nonstatistical
       samples to the population are: (1) the ratio method which divides the total dollar
       amount of misstatement in the sample by the fraction of total dollars from the strata of
       the population included in the sample; (2) the difference method which multiplies the
       average difference between audit and book values for sample items by the number of
       units in the strata of the population. In either case the results of each strata should be
       added together to determine a estimated misstatement for the population.

13C-3. In nonstatistical samples, the difference between the auditor's total projected
       misstatement and tolerable misstatement may be viewed as an allowance for sampling
       risk.



Comprehensive Questions
13-20. (Estimated Time – 20 minutes)

       a.     1.       In determining an acceptable level of risk of assessing control risk too
                       low, an auditor should consider the importance of the control to be
                       tested in determining the extent to which substantive tests will be
                       restricted and the planned control risk.

               2.      In determining the tolerable deviation rate, an auditor should consider
                       the planned control risk and how materially the financial statements
                       would be affected if the control does not function properly.

               3.      In determining the expected population deviation rate, an auditor
                       should consider the results of prior years' test, the overall control
                       environment, or utilize a preliminary sample.

       b.     1.       There is a decrease in sample size if the acceptable level of risk
                       assessing control risk too low is increased.

               2.      There is a decrease in sample size if the tolerable deviation rate is
                       increased.

               3.      There is an increase in sample size if the population deviation rate is
                       increased.

       c.      For a low risk of assessing control risk too low, it is generally appropriate to
               reconsider the planned control risk as the calculated estimate of the population
               deviation rate identified in the sample (7%) approaches the tolerable deviation
               rate (8%). This is because there may be an unacceptably high sampling risk
               that these sample results could have occurred with an actual population
               deviation rate higher than the tolerable deviation rate.

       d.      If statistical sampling is used, an allowance for sampling risk can be
               calculated. If the calculated estimate of the population deviation rate plus the
               allowance for sampling risk is greater than the tolerable deviation rate, the
               sample results should be interpreted as not supporting the planned control risk.
13-23. (Estimated time - 30 minutes)
       a.     Areas where judgment may be exercised by a CPA in planning a statistical test
              include:
               Determining the objectives of the plan. The CPA must identify the controls
                  that are of interest and relate the controls to relevant financial statement
                  assertions.
               Selecting the sampling method to be used. The CPA may choose from
                  among several methods including attribute and discovery sampling.
               Defining the population and sampling unit. The CPA must give
                  consideration to the appropriateness of the population to the objectives of
                  the plan, the population's homogeneity with respect to control procedures
                  to be tested, multiple client locations, changes in control procedures during
                  the year, and population size. In defining the sampling unit, the CPA must
                  consider compatibility with the objective of the test and audit efficiency.
               Specifying the attributes of interest. In attribute sampling, the CPA must
                  identify attributes that relate to the effectiveness of the controls being
                  tested.
               Determining sample size. The CPA must specify the acceptable level of
                  risk of assessing control risk too low, tolerable deviation rate, expected
                  population deviation rate, and population size.
               Determining the sample selection method. The CPA must decide which
                  sampling selection method to use (e.g., random number sampling or
                  systematic sampling).

        b.     The CPA must consider the qualitative aspects of the deviations as well as the
               number of deviations. Deviations that directly affect the financial statements
               or appear to be irregularities have greater audit significance. When the sample
               results do not support the planned control risk, the nature, extent, or timing of
               substantive tests are ordinarily modified, or, if applicable, tests may be made
               of other compensating controls.

        c.     Two techniques for selecting a nonstratified sample of 80 accounts payable
               vouchers are:
                Random number sampling. Use a table of random numbers or a computer
                  program that generates random numbers to identify 80 four digit numbers
                  that can be uniquely related to items in the population. When a table of
                  random numbers is used, the starting point in the table should be selected
                  randomly and the path to be followed through the table should be
                  determined in advance and followed consistently.
                Systematic sampling. Select every 40th voucher (3200 - 80) after selecting
                  the initial voucher (from 1-40) randomly. If the CPA is concerned that
                  there may be a cyclical pattern in the population, he or she may use
                  multiple random starts, multiplying the skip interval for a single random
                  start (40) by the number of multiple starts.
                      o (Estimated Time: 25 minutes)


13-27
        a.     Sample Size = 66
      b.     The sampling interval = $44,455

      c.     1.      Projected misstatement = $97,727.27
             2.      The incremental allowance for sampling risk = $48,704.55
             3.      The upper misstatement limit = $251,431.82

      d.     The auditor is 90% confident that the maximum overstatement in the
             population is $251,431.82. This is exceeds tolerable misstatement of
             $150,000. The know errors are immaterial, so there is a risk that he auditor is
             incorrectly rejecting the population. The auditor might consider increasing the
             sample size. Alternatively, the client might further investigate the errors and
             choose to adjust the book value of accounts receivable.

      Note: This solution is supported by an excel worksheet labeled Problem 13-27.

13-31. (Estimated Time – 20 Minutes)

      a.     The pricing test is a substantive test that relates to the detection risk
             component of audit risk.

      b.     Factors that should influence sample size are:
              Population size
              Variation in the population
              Tolerable misstatement
              Risk of incorrect acceptance
      c.     The sampling unit is stock items appearing on the computer printout. The
             items may be selected by any of the following methods: (1) simple random,
             (2) systematic random, (3) haphazard, and (4) block sampling. The method
             used should provide a representative sample. Use of a single block is generally
             not acceptable. Accordingly, when this method is used, several blocks should
             be selected.

      d.     In interpreting the results, Wheeler and Jones should (1) project the
             misstatement found in the sample to the population and (2) consider the
             sampling risk. 'The projected misstatement can be calculated in either of the
             following ways:

				
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