Jones considered the efficiency of other strategy alternatives to reduce the sam
ID: 2519660 • Letter: J
Question
Jones considered the efficiency of other strategy alternatives to reduce the sample size and concluded the confirmation procedures would be the most efficient and effective approach. She considered performing further tests of controls; performing additional detailed, targeted analytical procedures, performing a test of sales transactions (a related financial statement area) that would also provide assurance on assertions relevant to this test; or .increasing the number of items that are substantively tested 100 percent by lowering the threshold for selecting tems for 100 percent testing below $50,000 However, she concluded that it would be more efficient to confirm 92 items. Per above "The population contained 5 balances of more than $50,000, which totaled $500,000." What if items above $40,000 were 30 items and totaled $1.7 million. Would this change Jones's decision? Why or why not?Explanation / Answer
Ans
The auditor in this case is using formal non statistical sampling plan and uses a structured approach to calculate sample size and evaluate sample results.
The materiality (or basic allowance) is used in essentially two ways in planning the extent of audit of operations:
1. To determine the cut off for items that is individually significant because of their nature or amount.
2. To calculate sample size for sampling applications.
Based on this approach the auditor is going for 100% testing of items below the threshold limit of $50,000
If the population size has items above $40,000 were 30 items totaling $1.7 million . The auditor may determine the new cut off for items that are individually significant because of their nature or amount.
Yes Jones will change the decision on 100% testing with this new information
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