Question 1.
Answer each of the following:
1 Control risk has been assessed as high and detection risk is low. What is the timing of the substantive procedures likely to be?
2 The auditor has decided that they will use a larger sample for confirmations at year end. What is the level of detection risk?
3 Control risk has been assessed as low and detection risk is high. What type of substantive procedures are the auditors more likely to use?
4 Control risk has been assessed as low and detection risk is high. What size sample are the auditors more likely to use?
5 The auditor has decided that they will do more tests of details of balances and use larger samples. What is the likely level of control risk?
6 The auditor has been comparing the customer closing balances with the balance in the control account for a large sample of customers at year end. What is the level of control risk and detection risk?
Question 2.
For each of the following situations, indicate whether there would be an increase, decrease, or no effect on sample size:
1 The auditor has assessed control risk as low.
2 The auditor has discovered that the number of sampling units in the population has increased from 2380 to 5640.
3 The auditor has used stratification.
4 The auditor has increased the total error that they are willing to accept.
5 The auditor has assessed the risk of material misstatement as high.
6 The auditor now expects to find more errors than originally anticipated.
7 The risk that the auditor will conclude that a material error does not exist when in fact it does has increased.