Ethics Accountings Question Mr Arty works for Smile Accounting Firm as a senior

Question

Ethics Accountings Question

Mr Arty works for Smile Accounting Firm as a senior accountant. Currently, he is doing a review of rental property compliance testing of rental recipts and expenses fo the property owned by the client. He determines that the staff accontants tested only two tenants per property, instead od the three required by the audit program based on materiality considerations. However, to request more information from the client would cause massive delays, and the manager on the engagement is pressing hard for the information now. The magener did approach the client, who stated that she “ needed of the two properties.” The manager remind Artry that no problems were found from testing on the properties, in past years the workpaper called for just two properties to be reviewed, the firm has never had any acconting issues respect to the client, and he is confident the tesiting is sufficient . Explain the relationship between the manger’s explanation and the judment tendencies?

Explanation / Answer

Sampling selection method can be statistical or Non-statistical However, under both the methods auditor;s judgement plays a vital role. In the abobe scenario it appears that looking at the resources available and the restriction under which one must work, the manager has decided to use the judgement sample selection method. Judgement selection method is based on the auditor;s sound and seasoned judgement. The judgement is dependendant on various factors like value of the items selected, relative risk and reprsentativeness of the sample selected and previous audit experience on the similar item.

Since, auditor'sprevious experience of the client suggest no or little accounting errors, the auditor based on his previous experience can change the sample size based on his judgement. For nonstatistical sampling the auditor uses his experience with the client and his professional judgement when considering samole risk.

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