1. In planning the audit, an auditor takes three basic steps in determining the audit procedures to be performed for any business cycle or class of transactions to gather audit evidence concerning misstatement due to error or fraud. List those three basic steps below (5 marks). 2. Statistical sampling (15 marks) Scenario: Auditing Accounts Receivable Population: 10,000 customer invoices issued during the past year. Objective: Estimate the total misstatement in the accounts receivable balance. Steps: 1. Define the Population: All 10,000 customer invoices. 2. Determine Sample Size: Using statistical formulas, you have determined that a sample size of 200 invoices is needed to achieve the desired confidence level and tolerable error rate. 3. Select Sample: As auditor you have used a random number generator to select 200 invoices from the population. This ensures that each invoice has an equal chance of being selected. 4. Audit (test) the Sample: You have reviewed the 200 selected invoices, verified their accuracy, and identified any misstatements. 5. Test result: The sample reveals a 2% error rate. With the desired confidence level, auditors project a similar error rate for the entire population. The sample of 200 invoices shows a total misstatement of $5,000. Requirements: a. Based on your findings from the sample, project the total misstatement for the entire population of 10,000 invoices. b. As auditor, you have calculated the sampling risk, that the sample is representative of the population. c. If the performance materiality is set for $300,000, evaluate the risk of material misstatement in the accounts receivable balance. 3. The auditor gathers information from various sources to assess fraud risks. Given the following sources, discuss what information would be gathered and how that information would assist the auditor in his (her) auditing for fraud (10 marks). . Communications among audit team members. . Inquiries of management. Risk factors. . Analytical procedures. . Other procedures. Pan oo Scenario: ABC & Co. has been providing advisory services to XYZ Corporation, including tax planning and management consulting. These services account for 25% of the total fees that ABC & Co. earns from XYZ Corporation. Issues to consider: What are the potential threats to independence posed by ABC & Co.'s provision of non-audit services to XYZ Corporation? Requirements: 1. Identify the specific threats to independence present in the situation. 2. Assess the severity of the threat and explain why it is significant. 3. Recommend appropriate actions or safeguards that ABC & Co. and Caroline Le Blanc should implement to mitigate the threat to independence. Assignment Submission Requirements: A. Due for D2L Brightspace individual online submission on or before Monday, July 29, 2024, 2:00 PM (late, incomplete, and e-mail attachment submissions will be returned unmarked). B. File Format: Typewritten, using MS Word (No PDF and other file formats that do not allow for annotations or marking comments). C. Uniform Naming of Assignment File "Auditing II Assignment - Student Full Registered Name Student GBC ID.\" D. Solutions should follow the numbering sequence as in the questionnaire. Answers must be compelling (persuasive) to achieve assigned full marks. This graded assignment is a key component of the learning outcome for the course. While the coverage is extensive, ample time is provided to students to better plan, evaluate the requirements, and prepare and finalize the assignment for submission within the prescribed due date. The completion period aligns with the topical progression in the course and will complement the review and preparation efforts for the final examination