THE UNIVERSITY OF THE SOUTH PACIFIC

SCHOOL OF ACCOUNTING AND FINANCE

AF 304 - AUDITING
(PRINT MODE : SEMESTER 1 - 2017)

FINAL EXAM

(Time allowed: 3hours + 10 min extra reading time)

(50% Weighting towards Final Grades &
Minimum mark of 40% in the Final Exam)

INSTRUCTIONS FOR CANDIDATES:

 THERE ARE 4 QUESTIONS IN THIS EXAM PAPER -

ATTEMPT ALL QUESTIONS.
 SHOW ALL CALCULATIONS.
 YOU MAY USE SILENT, NON-PROGRAMMABLE
CALCULATOR.

QUESTION DESCRIPTION MARK SUGGESTED

ALLOCATION TIME
1 Multiple choice 25 45 MINUTES
2 Audit planning/testing 40 55 MINUTES
3 Audit sampling 20 45 MINUTES
4 Audit review & reporting 15 35 MINUTES

TOTAL 100 3 HOURS

__________________________________________________________________
Question 1 Multiple Choice - General [25 marks]

Circle the BEST answer for each of the following multiple-choice items. Each
multiple-choice question is each worth one (1) mark.

1. Auditing plays a vital role in business, government and our economy. Which of
the following bodies does not require an annual audit?
a. all public and large proprietary companies.
b. small proprietary companies.
c. 'not-for-profit' organisations, including educational institutions.
d. commonwealth government departments and statutory authorities.

2. Recent corporate and audit failures have led to a wide-ranging reform agenda
attempting to have the profession refocus on basics - the public interest, redefining
audit relationships and fundamental audit methods. This refocus has been called
the:
a. conformance role of auditing.
b. enhancing role of auditing.
c. convergence role of auditing.
d. none of the above.

3. Which of the following is true regarding auditor’s responsibility for detecting

fraud?
a. auditors are required to detect all fraud during an audit.
b. auditors must be reasonably cautious and careful and investigate anything
suspicious.
c. auditors are not required to detect possible fraud.
d. auditors are not able to investigate fraud.

4. Accepting a gift with the possibility of it subsequently being made public is a

form of what type of threat?
a. self-interest.
b. self-review.
c. familiarity.
d. intimidation.

5. Independence is the cornerstone of the auditing profession. Which of the

following is self-review threat?
a. a guarantee from an officer of an assurance client.
b. performing services for an assurance client that directly affects the subject
matter of the assurance engagement.
c. long association of a senior member of an assurance team with the assurance
client.
d. pressure to reduce inappropriately the extent of work performed in order to
reduce fees.

2
6. Which case laid down the fundamental auditing principles of the ‘watchdog’ role
and the notion of taking reasonable skill and care?
a. Kingston Cotton Mill.
b. London and General Bank.
c. Pacific Acceptance.
d. AWA.

7. Which of the following is not an inherent limitation of an audit?

a. time lapse between the balance date and the presentation of the audit report.
b. audit testing of selective samples.
c. forming professional judgements in highly specialised areas.
d. a means of improving controls and operations.

8. Audit committees are perceived to strengthen the independence of auditors.

Which of the following is not an objective of an audit committee?
a. ensuring that the entity operates in the best interests of the shareholders.
b. improve the credibility and objectivity of the accountability process including
financial reporting.
c. assist the board of directors to discharge its responsibility to exercise due care,
diligence and skill.
d. facilitate the maintenance of the independence of the external auditor.

9. S.294 of the Corporations Act requires a Directors' Declaration. Which of the

following is not an inclusion in that declaration?
a. that the financial statements and notes comply with accounting standards.
b. that the financial statements and notes are correct and accurate.
c. that the financial statements and notes comply with the Corporations Act.
d. that there are reasonable grounds to believe that the company will be able to
pay its debts as and when they fall due.

10. When the auditor concludes that there is substantial doubt about the entity’s
ability to continue as a going concern for a reasonable period of time, and this fact
is adequately disclosed in the notes to the financial statements, the audit report
should express:
a. a qualified opinion due to the uncertainty.
b. the standard unqualified opinion.
c. an unqualified opinion, with an emphasis of matter paragraph.
d. an adverse opinion.

11. In the opinion paragraph of the standard audit report, the phrase “in our opinion,”
really expresses what about the financial statements being presented reasonably
and without bias or distortion:
a. “we certify...”
b. “we guarantee...”
c. “we are certain...”
d. “we are satisfied...”

3
12. Which of the following is not an ethical consideration for the auditor in deciding
to accept an audit engagement?
a. ensure their scheduling process allows completion on time.
b. evaluate circumstances that would compromise independence.
c. assessing competence to perform the audit.
d. determine their ability to use due care in performing the audit.

13. Setting materiality levels, assessing audit risk and its components and obtaining
an understanding of the internal control structure are all part of which audit stage?
a. client evaluation.
b. audit planning.
c. conducting the audit.
d. issuing the audit report.

14. Which of the following would be considered an audit adjusting entry?

a. a significant amount of inventory was found which had not been included in
the accounts and subsequently was by the auditors.
b. payroll owing for the last five days of the financial year was recorded by
management.
c. the accounts receivable balance is debited by the auditors to separately show
customer accounts with credit balances relating to customer advances.
d. depreciation on the office equipment was recorded by.

15. For a given assertion, the relationship between the level of detection risk (DR)
and assessed control risk (CR) and inherent risk (IR) is shown correctly in which
of the following, where + means increase, - means decrease:
a. +DR if +CR and +IR.
b. +DR if -CR and -IR.
c. +DR if +CR and -IR.
d. +DR if -CR and +IR.

16. The auditor has determined that there is a preponderance of persuasive evidence
for each financial statement assertion that is material, and therefore a reasonable
basis for their opinion. Which of the following would not be a possible opinion
that the auditor could issue?
a. an unqualified opinion.
b. an ‘except for’ opinion.
c. an adverse opinion.
d. an inability to form an opinion.

17. Flowcharts should depict all of the following except:

a. all operations performed in processing the class of transactions.
b. the method of processing.
c. the extent of segregation of duties.
d. audit procedures conducted.

4
18. After performing additional tests of controls, the auditor reassesses control risk
from the initial planning level of slightly below maximum to moderate. The
auditor should now:
a. decrease the level of detection risk, and decrease substantive testing.
b. increase the level of detection risk, and increase substantive testing.
c. increase planned substantive testing.
d. increase the level of detection risk, and decrease substantive testing.

19. A test of an asset for overstatement provides corresponding evidence on:

Expense Revenue Liability

a. Overstatement Overstatement Understatement
b. Understatement Overstatement Overstatement
c. Understatement Understatement Understatement
d. Overstatement Overstatement Overstatement

20. Which of the following is an advantage of PPS sampling over variable sampling?
a. it is more suitable for detecting errors of understatement.
b. individually material items are automatically selected.
c. as expected error increases, sample size will be smaller than that required by
variable sampling.
d. all of the above.

21. Which of the following models expresses the general relationship of risks
associated with the auditor’s evaluation of control risk (CR), inherent risk (IR),
and audit risk (AR) that would lead the auditor to conclude that additional
substantive tests of details of an account balance are not necessary?

IR CR AR
a. 20% 40% 10%
b. 20% 60% 5%
c. 10% 70% 4.5%
d. 30% 40% 5.5%

22. In obtaining evidence concerning the cash balance, the auditor performs the
following procedures: Scan client-prepared bank reconciliations and verify the
mathematical accuracy of the reconciliation. In this case, it is likely that:
a. detection risk is set at moderate to high.
b. detection risk is set at low to very low.
c. control risk is set at slightly below maximum to maximum.
d. control risk is set at moderate to high.

5
23. The performance of cash cut-off tests provides evidence primarily for which of
the following assertions?

Existence or Rights and Accuracy or

occurrence Completeness obligations valuation Disclosure
a. * *
b. * *
c. * *
d. * *

24. An auditor observes inventory held by the client and notes that some of the
inventory appears to be old, but in good condition. Which of the following
conclusions is justified by the audit procedure?

I. The older inventory is obsolete.

II. The inventory is owned by the company.
III. Inventory needs to be reduced to current market value.

a. I only.
b. II only.
c. I & III only.
d. None of the above

25. If the application of accounting policies in compliance with statutory and other
requirements does not result in a fair presentation in accordance with the
accounting standards the auditor should:

a. express an unqualified opinion in accordance with statutory and other

requirements and a qualified opinion in accordance with the accounting
standards.
b. express an unqualified opinion in accordance with statutory and other
requirements and an unqualified opinion in accordance with the accounting
standards.
c. express a qualified opinion in accordance with statutory and other
requirements and a qualified opinion in accordance with the accounting
standards.
d. express a qualified opinion in accordance with statutory and other
requirements and an unqualified opinion in accordance with the accounting
standards.

6
__________________________________________________________________
Question 2 Audit Planning/Testing _ [40 marks]____

Part A: Theory [10 marks]

(i) The audit risk standards outline the circumstances in which the auditor is required to
undertake testing of controls. Identify two of these circumstances? [5 marks]

(ii) Distinguish between the types of testing that the auditor would undertake in testing
the existence of internal control versus the effectiveness and continuity of internal
control. [5 marks]

Part B: Audit Planning [20 marks]

Lagoon International Pty Limited

Consider each of the following situations, which are independent of each other:

a) Your audit plan for sales places substantial reliance on the system of internal
control and the use of analytical review. Your testing of the internal control
system for sales has found a significant number of instances where clients’ credit
ratings have not been checked and abnormally large discounts have been given.
The sales manager states that these changes have been the result of difficulties in
maintaining past sales levels.

b) You are carrying out the annual audit of a tractor retailer. You are aware of
significant problems in the rural industry over the past six months and little
improvement is in sight.

c) Since the last audit your client has introduced a new management compensation
scheme with the result that top managers’ salaries are closely tied to the
company’s’ profitability.

d) Management informs you that during the year the internal auditors discovered that
a substantial amount of stock had disappeared from a small branch of your client.
A number of local managers have subsequently resigned although there were no
prosecutions. The loss equalled 1% of the company’s operating profit.

7
 e) Since your last audit the client has introduced a new computer information system
for inventory to replace the manual system. Management has indicated that the
big advantage of the new system over the old one is that it provides information
on inventory levels and gross margins for both product line and geographical area.

f) A new competitor of your client entered the market two months before year end
and, since that time, selling prices have fallen significantly. Your inquiries have
revealed that the industry expects heavy discounting to continue for the whole of
next year.

g) The organization has introduced an internal audit department in the second

quarter of the year. The section consists of three staff. The chief Internal Auditor
is a former “Big 6” audit manager with 10 years experience in the profession. He
has no internal audit experience. He reports direct to the Managing Director.
Since joining the firm he has spent most of his time examining the internal control
systems of the company. He is assisted by one new graduate and another person
who has two years of internal audit experience and is presently in his third year
part-time of a commerce degree.

h) There were neither major disposals nor additions to fixed assets during the period.
Fixed assets are not material and consist mainly of furniture and fittings

Required:

Assume you are responsible for constructing an audit plan in each of the
situations discussed above. In each case describe how the situation posed would
affect your audit plan. Include reference to the nature and /or extent of audit
evidence to be collected. [2 ½ marks each]
[Total = 20 marks]

8
Part C: Audit Testing [10 marks]
You are the audit manager in charge of the 31 December audit of Pacific-Chow Pty Ltd, a
large private company operating in the boutique food and beverages market. The
audit is now nearing completion and you are preparing a schedule of adjustments to
discuss with the client. The schedule of adjustments includes the following:

Adjustment Required
Dr Cr
Balances affected $000 $000 Explanation

1. Obsolescence expense 500 Store of dried goods in Darwin warehouse

Inventory 500 destroyed by vermin

2. Interest expense 600 Interest not recorded on borrowings

Borrowings 600

3. Income tax expense 400 Underprovision for tax for year ending 30/6/X1.
Provision for tax 400 client disagrees with treatment of claimed
deductions for tax year ended 20X1.

4. Depreciation expense 1000 Record additional depreciation expense on

Accumulated depreciation 1000 catering equipment. Discussions indicate it will
be scrapped next year. Client believes it has high
scrap value; review of publications in this area
suggests this is unlikely.

Materiality for the audit has been set at $1 600 000.

Required:

a) Which of the above items, if any, do you believe require adjustment? Explain.
[5 marks]

b) Your partner had originally set a preliminary materiality level for the audit of
Pacific-Chow Pty Ltd at $3000000. After your review of inherent risk your
partner has lowered this materiality level to $1600000. Outline how the new
lower materiality level will affect the nature and extent of audit procedures
planned. [5 marks]

9
______________________________________________________________
Question 3 Audit Sampling [15 marks]____

Sampling Techniques [15 marks]

You are in the process of evaluating the internal control system of your client, Kris
Company, and you desire to perform a compliance test of controls that the client has
indicated are in effect in the accounts payable area. The specific control in which you are
interested relates to the matching of the purchase order, receiving report, and vendor
invoice, prior to approving the invoice for payment. You are told that the 3 documents are
compared, cancelled, and approved for payment by the accounts payable supervisor. After
performing this operation, the supervisor indicates that the invoice is approved for payment,
initials the invoice, staples the 3 documents together and forwards them for processing.

After processing the documents are filed together in voucher number order. Each year, the
voucher number begins at 0001. The last voucher number assigned during the current year is
8178. You define an error as being either (1) any approved invoice that does not agree in
amount with the other 2 documents, (2) cases in which any of the 3 documents is missing, or
(3) any paid invoice that does not bear the initials of the supervisor. In the past you have
found an error rate in this population of approximately 3% and you expect this condition in
the current year. If you found evidence that the error rate exceeded 6%, however, you would
conclude that this control feature was ineffective. Because of the importance you place on
this control, you decide to use a 90% reliability level.

Required:

a) Determine the sample size appropriate in this case if the auditor uses estimation
sampling for attributes. [3 marks]

b) Discuss the procedures you would use in selecting the sample. [3 marks]

c) What would you conclude if, in examining the items in the sample, 3 errors were
found? [4 marks]

d) If 5 errors were found in the sample, what would your conclusions be? What would
be the effect on your audit? [5 marks]

10
_______________________________________________________________
Question 4 Audit Review & Reporting [20 marks]

Part A: Audit Completion [10 marks]

Assume that an auditor is expressing an opinion on Rose Ltd’s financial report for the
year ended 30 September 20X3, that field work was completed on 21 October 20X3, and
that the audit opinion to accompany the financial report is now being prepared. In each
item a ‘subsequent event’ is described. This event was disclosed to the auditor either in
connection with the review of subsequent events or after the completion of field work.
a) A large account receivable from Chan Industries (material to financial report
presentation) was considered fully collectible at 30 September 20X3. Chan suffered
a plant explosion on 25 October 20X3. Since Chan was uninsured, it is unlikely that
the account will be paid.

b) The court ruled in favour of the company on 25 October 20X3 concerning

deductions claimed on the 20X1 and 20X2 tax returns. Rose Ltd had provided in
accrued taxes payable for the full amount of the potential disallowances. The
Commissioner of Taxation will not appeal the court’s ruling.

c) Rose Ltd’s manufacturing division, whose assets constituted 75% of Rose Ltd’s
total assets at 30 September 20X3, was sold on 1 November 20X3. The new owner
assumed the indebtedness associated with this property.

d) On 15 October 20X3, a major investment advisor issued a pessimistic report on

Rose Ltd’s long-term prospects. The market price for Rose Ltd’s ordinary shares
subsequently declined by 50%.

e) At its 5 October 20X3 meeting Rose Ltd’s board of directors voted to double the
advertising budget for the coming year and authorised a change in advertising
agencies.

Required:
You are to indicate in each case the required disclosure of this event in the financial
report. Each of the 5 cases is independent and is to be considered separately. [2m/each]
[Total = 10 marks]

11
Part B: Audit Reporting [10 marks]
You are an audit manager for C.K. Chartered Accountants and are currently finalising
your 30 June 2010 audits.

Company A
Company A is a listed company with 3 subsidiaries, Company B, Company C and
Company D. Another firm D.K, Chartered Accountants act as the auditors of Company D
and have qualified their audit report on the basis that continued financial support from
Company A is required for Company D to continue as a going concern.

In auditing Company A and the economic entity, you are satisfied that the going concern
basis of preparing the financial report is appropriate. In addition, you are satisfied that the
carrying value in Company A’s financial report of the investment in Company D of $200
is not stated above its recoverable amount. The company and the economic entity made
profits for the year.

Company H
The audit of Company H was extremely difficult as the client did not maintain
appropriate books and records during the year. Although the statutory registers were
maintained, the accounting records were not updated for the first 9 months of the year as
the company was without an accountant during this period. An accountant was employed
in April 2010 and she tried to reconstruct records from the details of receipts and
payments available. The accountant has been unable to reconcile the bank account and
you are not satisfied that all transactions which occurred during the year are reflected in
the financial report. The operating loss recorded by Company H in the current year is
$22 190.

Company G
Company G, a property developer, holds freehold property purchased for development
and resale which is classified as inventories. This property, as disclosed in the financial
report at Note 10, has been valued at cost, which is $5 000 000. In your audit you found
that in the current market the net realisable value of the property is $3 500 000. Although
material, the client does not consider that the value of the property should be written
down as future development will result in the property being worth more than the current
book value. The write-down would have no tax effect. The financial report audited,
including the Directors’ Declaration, spans pages 5 to 38. The company made a profit for
the year. Company G has other assets of $25 000 000 and liabilities of $7 000 000.

Required:

Discuss the type of audit opinion that you intend to issue for each of the above companies
for the year ending 30 June 2010. [3 marks each]
[Total = 9 marks]

THE END

12
Question 1 Multiple Choice - General [25 marks]
Circle the BEST answer for each of the following multiple-choice items.
(PLEASE ATTACH THIS WITH YOUR ANSWER BOOKLET)

1. A B C D

2. A B C D

3. A B C D
4. A B C D
5. A B C D
6. A B C D
7. A B C D

8. A B C D
9. A B C D
10. A B C D
11. A B C D
12. A B C D
13. A B C D

14. A B C D

15. A B C D
16. A B C D
17. A B C D
18. A B C D
19. A B C D
20. A B C D
21. A B C D
22. A B C D
23. A B C D
24. A B C D

25. A B C D

13
0,00%
0.00% 149(0) 99(0) 74(0) 59(0) 49(0) 42(0) 36(0) 32(0) 29(0) 19(0) 14(0)

0.25 236(1)
236(1) 157(1)
157(1 ) 117(1) 93(1) 78(1) 66(1) 58(1)
58(1 ) 51 (1) 46(1 )
46(1) 30(1) 22(1 )

0.50 - 157(1) 117(1) 93(1 )

93(1) 78(1) 66(1 ) 58(1 )
58(1) 51 (1) 46(1)) 30(1)
46(1 30(1 ) 22(1 )

0.75 - 208(2) 117(1 ) 93(1) 78(1) 66(1 ) 58(1) 51 (1)

51 46(1)
46(1) 30(1) 22(1 )
22(1)

1.00 - 156(2) 93(1 )

93(1) 78(1 ) 66(1 ) 58(1 )
78(1) 51 (1) 46(1) 30(1 )
30(1) 22(1)

1.25 - 156(2) 124(2) 78(1) 66(1 ) 58(1 ) 51 (1) 46(1) 30(1 )

30(1) 22(1)

1.50 - 192(3) 124(2) 103(2) 66(1 }.. 58(1)

66(1}.. 58(1 ) 51 (1) 46(1))
46(1 30(1 )
30(1) 22(1)

1.75 - 227(4) 153(3) 103(2)

103(2) 88(2) 77(2) 51 (1) 46(1) 30(1) 22(1)

2.00 - 181(4) 127(3) 88(2) 77(2) 68(2) 46(1 )

46(1) 30(1) 22(1 )
22(1)

2.25 - 208(5) 127(3) 88(2) 77(2) 68(2) 61 (2) 30(1) 22(1)

2.50 - 150(4) 109(3) 77(2) 68(2) 61(2) 30(1) 22(1)

2.75 - 173(5) 109(3) 95(3) 68(2) 61 (2)

61(2) 30(1)
30(1 ) 22(1)
22(1 )

3.00 - 1~9(4) 95(3)

195(6) 1?9(4) 84(3) 61 (2)
61(2) 30(1) 22(1)

3.25 148(5) 112(4) 84(3) 61 (2) 30(1) 22(1)

3.50 - 167(6) 112(4) 84(3) 76(3) 40(2) 22(1)

T,~ 9,3
TItle i .J
3.75 185(7) 129(5) 100(4) 76(3) 40(2) 22(1)
22(1 )
Slitisticalsm
Statis6cal SalT

4.00 - 146(6) 100(4) 89(4) 40(2) 22(1 )

22(1) silas Ilor
silos ••
compliance

5.00 - 158(8) 116(6) 40(2) '''''';~

30(2) '''
30(2) ....:~ .'
of
Of QYtf-retian
O't'ef-teiWl

numbe1
(with numbel
6.00 - 179(11) 50(3) 30(2} expected em
30(2)
pif!ntl'leses)
pif!ntheses)
7.00 68(5) 37(3) SoUfU.
Sourer. Aut!
Aoo
s.m..... G
~plilfD

Note: This table assumes a large population. For

for a discussion of the effect of population on No I, AAAF
AARF
sample size, see Audit Sampling Guide, AICPA, 1983, Chapter 2.
Chapler 2. 1983, 0 90

1+
l~

14
 E.IpuIed
ErpuIed
population
populallDn Tolerable rate
TDlerable
devIatIon -
deviation ~---.
--- --
'rata
'rate 2% 3% 4"f.
4o/G 50/0
!W. 6%
Ii% 10/0
1% 8%.
8% S%
Q% 111% 15% 2 ' j.

0,00%
0.00% 114(0) 76(0) 57(0) 45(0) 38(0) 32(0) 28(0) 25(0) 22(0) 15(0) 15(0)

0.25 194(1) 129(1) 96(1) 77(1 ) 64(1) 55(1))

55(1 48(1 ) 42(1) 38(1)
38(1) 25(1)
25(1 ) 18(1 )

0.50 129(1 )
194(1) 129(1) 96(1) 77(1) 64(1) 55(1) 38(1 )
48(1) 42(1) 38(1) 25(1) 18(1 )

0.75 265(2) 129(1 ) 96(1) 77(1) 64(1) 55(1

55 (1 ) 48(1 )
48(1) 42(1)) 38(1)
42(1 25(1) 18(1 )

1.00 - 176(2) 96(1) 77(1) 64(1) 55(1) 48(1 ) 42(1) 38(1) 25(1 ) 18(1)

1.25 - 221 (3) 132(2) 77(1) 64(1) 55(1 ) 48(1) 42(1) 38(1
38(1 ) 25(1) 18(1)

1.50 - 132(2) 105(2) 64(1) 55(1) 38(1)

48(1) 42(1) 38(1 25(1) 18(1 )
., ,
1.75 - 166(3) 105(2) 88(2) 55(1) 48(1) 42(1) 38(1
38(1 ) 25(1) 18(1 )
18(1

2.00 - 198(4) 132(3) 88(2) 75(2) 48(1 )

48(1) 38(1)
42(1) 38(1) 25(1) 18(1)

2.25 - 132(3) 88(2) 75(2) 65(2) 42(1) 38(1 ) 25(1) 18(1)

18(1

2.50 - 158(4) 110(3)

11 0(3) 75(2) 65(2) 58(2) 38(1 ) 25(1) 18(1)

2.75 - 209(6) 132(4) 94(3) 65(2) 58(2) 52(2) 25(1))

25(1 18(1)

3.00 -- 132(4) 94(3) 65(2) 58(2) 52(1 ) 25(1) 18(1)

18(1

3.25 - 153(5) 113(4) 82(3) 52(1)

58(2) 52(1 25(1 )
25(1) 18(1 )
18(1)

3.50
350 - 194(7) 113(4) 82(3) 73(4) 52(2) 25(1) 18(1)

r"; t./. f.4

7. g.4
3.75 - 25(1) 18(
18(11))
131 (5) 98(4) 73(3) 52(2)
Stalistical sample
sIzes
Slzes lor
4.00 - 149(6) 98(4) 73(3) 65(3) 25(1))
25(1 18(1
18(1)

-
compliance
testino: 10"4
lestino: 10% nst
rist
01 over-reliance
O\Ier-reliance 5.00 - 160(8) 115(6) 78(4) 34(2) 18(1
18(1),>
(with number 01
(WIth 01
expected elTors
e);pect!(l in
errors in 6.00 - 182(11 ) 116(7) 43(3) 25(2)
parentheses)
Soun;,:
Sourn: Audit 7,00
7.00 - 199(14) 52(4) 25(2)
SlmpHng
SimpM9 Gvide
Gllide
No "t. AAAf,
AAAF, Note: This table assumes a large population. For
For a discussion 01 the effect of population on
1983. p 91. sample size, see Audit Sampling Guide, AICPA, 1983, Chapler
Chapter 2.

I"I" ..

15
 oO. 4.61
4.61 3.00 2.31 1.90 1.61 1.39 1.21 1.00 .70
1 6.64 4.75 3.89
3.69 3.38
3.36 3.00 2.70 2.44 2.14 1.68
1.66
2 6.41
8.41 6.30 5.33 4.72 4.26
4.28 3.93 3.62 3.25 2.68
266
3 10.05
1005 7.76 6.69 6.02 5.52 5.11 4.77 4.37 3.66
3.68
4 11.61
11 .61 9.16 8.00
6.00 7.27 6.73 6.28
6.26 5.90 5.43 4.68
4.66
5 13.11 10.52 9.26
9.28 8.50
6.50 7.91 7.43 7.01 6.49 5.68
5.66
6 14.57 11 .65
11.85 10.54 9.71 9.08
9.06 6.56
8.56 8.12
6.12 7.56 6.67
7 16.00 13.15 11.78 10.90
11.76 10.24 9.69 9.21 6.63
8.63 7.67
86 17.41 14.44 13.00 12.08
12.06 11 .36
11.38 10.81 10.31 9.68 8.67
9 18.79 15.71 14.21 13.25 12.52 11 .92
11.92 11 .39
11.39 10.74 9.67
10 20.15 16.97 15.41 14.42 13.66 13.02 12.47 11 .79
11.79 10.67
11 21 .49
21.49 18.21
16.21 16.60 15.57 14.78 14.13
14 .13 13.55 12.84 1167
12 22.83 19.45 17.79 16.72 15.90 15.22 14.63 13.89
13.69 12.67
12 .67
13 24.14 20.67 18.96 17.86 17.02 16.32 15.70 14.93
1493 13.67
14 25.45 21.89
21 .69 20.13 19.00 18.13
16.13 17.40 16.77 15.97 14.67
15 26.75 23.10 21.30 '20.13 19.24 18.49 17.84 17.02 15.67
16 28.03 24.31 22.46 2t.26 20.34 19.58
19.56 18.90
16.90 18.06 16.67
17 29.31 25.50
25 .50 23.61 22.39 21.44 20.66 19.97 19.10 17.67
18
16 30.59 26.70 24.76 23.51 22.54 21.74 21.03 20.14 18.67
19 31.85
31 .85 27.88
27.66 25.91 24.63
24 .63 23.64 22.81
22 .61 22.09 21.18
21 .16 19.67
20 33.11 29.07 27.05 25.74
2705 24.73 23.89
23.69 23.15 22.22 20.67
Ta blt 9.13
TiJblt
Reliability
Atllablhty factors Expansion factors
factors for expected errors
for errors of
01
overstatement
ovtrsta!emenl , . R~1i of InCllm!ct acceptance "''''',:~
. ,
Source ' Audit
Soulre
Sampling
SiJmpling Guide,
Guide. t 'l'.
1'Y. :ffi
fil{, tll%
111% 11>%
15%. ZlI%
2l1% 25% 311% :Il%
31% SJWt\
Sll'l1t1
,,
No
No 1, AARF
1. AARF.
"
1.9 1.6 1.5 1.4 1.3 1.25 1.2 1.15 1.0
pp 99-100.
PD 99-100.

, ft 111%
------------- - - ---------
Number of Incremental Incremental
oversfalemenl Rell2bilily changes In Rellablilly changes ill
elTOIS factor faclor laclor factor

0 3.00 2.31
TiJble
Table 9. 15
9.15
1 4.75 1.75 3.89 1.58
Incremental
2 6.30 1.55 5.33 1.44
tOf 5
factors lor
3 7.76 1.46 6.69 1.36
risk
and 10% risk
4 9.16 1.40 8.00 1.31
of incorrect
5 10.52 1.36 9.28 1.28
acceptance

Ill.

16