...complete Parts A and B and those files are available on BB. Hooplah, Inc. 9.6 Applying Audit Sampling Concepts to Tests of Controls and Substantive Testing in the Revenue Cycle Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt l ea r n ing ob je C t ive s After completing and discussing this case you should be able to [1] Understand the differences between statistical and non-statistical sampling [2] Appreciate the professional judgment involved in determining the extent of sampling to be performed [3] Appreciate the role of sampling risk in determining sample size and in evaluating results Understand how to perform attribute sampling for tests of controls [5] Know how and why it is important to consider size- and risk-based substantive testing prior to obtaining evidence using audit sampling [6] Understand the implications of the results of tests of controls on substantive testing [4] INTRODUCTION Your audit firm, Garrett and Schulzke LLP, is engaged to perform the annual audit of Hooplah, Inc., for the year ending December 31, 2012. Auditing standards also allow The case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and Steven M. Glover, Ph.D. and Douglas F. Prawitt, Ph.D. of Brigham Young University, as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of an administrative situation. Hooplah, Inc. is a fictitious company. All characters and names...
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...Case 9.6: Hooplah Inc. Part A: Test of Controls [1] Evaluate the appropriateness of Darrell’s conclusions relating to the first two controls: [a] Is it acceptable to use the same set of transactions and the same sample size to test two different controls? 1. a. Darrell should not resort to using the same set of transactions and same sample size to test the first two controls. Although all sales pass through both controls and the tolerable deviation rate is the same, the expected population deviation rate varies, meaning that Darrell should use a new randomly chosen set of transactions for the second control. In the first control, since it is moderately important the deviation rate is targeted at 8%. The population deviation rate is set at 1%, indicating that a sample size of 58 should be used, with an allowance for 1 deviation and still be assumed tolerable. In the second control, the tolerable deviation rate is still set a 8%, although now the population deviation rate is set at 2%, increasing the sample size up to a set of 77 transactions. In addition, there is now an allowance for 2 deviations within the set. [b] Do you agree with Darrell’s conclusions with respect to these first two controls? If not, why not? In evaluating Darrell’s conclusions, you may wish to refer to the attribute sampling evaluation table available in Appendix A. b. Darrell’s conclusions regarding the first two controls are not entirely accurate. Because he did not test using the right...
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...Assessing risk & Internal controls II | 6 pg. (LO 6-7) | | T DC 6-8 | | 8 | May 28 | Planning | | | Modern Tastings * | Hand in to Drop Box | | June 2 | Cancelled | | | | | 9 | June 3 | Review | | | Toy Factory | | MT # 1 | June 4 | Mid-term #1 | | | | | 10 | June 9 | Fraud risk assessment | 7 | 240, 250 | Laramie Wire | | 11 | June 11 | Audit Evidence | 8 | 230, 500, 520, 520 | Dog Ate my working papers * | Hand in to Drop Box | 12 | June 16 | Control Assessment & Testing I | 9 LO 1-5 | | Past exam question to be posted on learn | | 13 | June 18 | Control Assessment & Testing II | 9 LO 6-7 | | Howard Street Jewelers | Hand in to Drop Box | 14 | June 23 | Sampling | 10 | 500, 530 | Hooplah Inc. Part A | | 15 | June 25 | Audit of Revenue Receivable & Receipt process | 11 LO 1-3 | 520 | Simply Soup | | 16 | June 30 | Testing of Sales & Collection Cycle | 11 LO 4 – 7 | 505 | RedPack Beer Company | Hand in to drop box | 17 |...
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...Auditing Cases An Interactive Learning Approach FIFTH M F S D E D ITIO N S. B A. B M. G F. P Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Donna Battista Acquisitions Editor: Stephanie Wall Editorial Project Manager: Christina Rumbaugh Senior Managing Editor: Cynthia Zonneveld Production Project Manager: Carol O'Rourke Senior Operations Supervisor: Diane Peirano Printer/Binder: BindRite Graphics, Robbinsville Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text. Copyright © 2012, 2009, 2006, 2003, 2000 by Pearson Education, Inc., publishing Prentice Hall. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your request to 201-236-3290. Many of the designations by manufacturers and sellers to distinguish...
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