Binu is performing tests of controls in the purchases cycle of Oakland Hardware Company. Based on the

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Binu is performing tests of controls in the purchases cycle of Oakland Hardware Company. Based on the audit firm guidelines, a sample size of 50 purchases is selected from the cash disbursements file. The following summarizes Binu?s results of one of his tests:

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REQUIRED

a. If the controls that Binu was testing were not effective, what would be the potential misstatement?

b. Complete Table 2 to evaluate Binu?s results. Because internal controls were considered effective, Binu used a 10 percent ARO (Acceptable Risk of Overeliance) a zero EPER (Estimated Population Error Rate), and a 5 percent TER (Tolerable Exception Rate) for the attribute. Binu used the information in Table 1 (for a population of 5000 invoices) to evaluate his results results:

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Related Book For  book-img-for-question

Auditing The Art and Science of Assurance Engagements

ISBN: 978-0134613116

14th Canadian edition

Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones

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