internal control procedures over accounts receivable have been evaluated by you as excellent and you believe few misstatements will be found‚you decide to use probability-proportional-to-size sampling. The company has 4‚000 customer accounts with a total book value of $3‚000‚000. You decide $150‚000 is the maximum tolerable misstatement and anticipate that there may be $30‚000 of misstatement in the population.You wish to limit the risk of incorrect acceptance to 10%. It is your intention to seek positive
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The materiality threshold that will influence users of the financial statements will vary depending on the context in which the entity operates. For example‚ the magnitude of a misstatement that will influence financial statement users will vary depending on how the entity is performing relative to the industry. Misstatements of a smaller magnitude will be more influential for an entity just achieving the industry average compared to an entity significantly over- or under-achieving relative to the
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Chapter 9 Multiple-Choice Questions 1. easy a If it is probable that the judgment of a reasonable person would have been changed or influenced by the omission or misstatement of information‚ then that information is‚ by definition of FASB Statement No. 2: a. material. b. insignificant. c. significant. d. relevant. 2. easy b The preliminary judgment about materiality is the amount by which the auditor believes the statements could be misstated and still not affect the decisions
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PROSPECTUS SUPPLEMENT (To REMIC Prospectus dated May 1‚ 2002) $250‚000‚000 Guaranteed REMIC Pass-Through CertiÑcates Fannie Mae REMIC Trust 2002-46 The CertiÑcates We‚ the Federal National Mortgage Association (""Fannie Mae ’ ’)‚ will issue the classes of certiÑcates listed in the chart on this page. Payments to CertiÑcateholders We will make monthly payments on the certiÑcates. You‚ the investor‚ will receive ‚ interest accrued on the balance of your certiÑcate‚ and ‚ principal to the extent
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CHAPTER 3 RISK ASSESSMENT AND MATERIALITY Answers to Review Questions 3-1 Audit risk is the risk that the auditor may unknowingly fail to appropriately modify the opinion on a set of financial statements that are materially misstated. Engagement risk is the exposure to loss or injury to professional practice from litigation‚ adverse publicity‚ or other events arising in connection with financial statements audited and reported on. In simple terms‚ audit risk is the risk that an auditor will
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process by selecting a base to calculate Planned Materiality. We allocated the Materiality to the relevant accounts and set a Tolerable Misstatement for each account. Then‚ we assessed Audit Risk‚ Inherent Risk‚ and Control risk to derive Detection Risk. As a result of these decisions‚ we derived Sample Size and Sampling Interval‚ and set an Expected Misstatement. We learned that certain accounts have to be audit 100 percent. Some of these accounts are cash‚ intangible‚ and line of credit. These
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Inherent Risk Inherent risk is the susceptibility of an account balance or class of transactions to misstatement that could be material either individually or when aggregated with misstatement in other balances or classes assuming that there were no related internal controls. This risk mainly arises at the level of management and the risk factor generally being high. Factors Affecting Inherent Risk: At the level of financial statement Integrity of management; Management’s experience and
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ASA 240 (April 2006) Auditing Standard ASA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of a Financial Report Issued by the Auditing and Assurance Standards Board Obtaining a Copy of this Auditing Standard This Auditing Standard is available on the AUASB website: www.auasb.gov.au. Alternatively‚ printed copies of this Auditing Standard are available b y contacting: Auditing and Assurance Standards Board Level 4 530 Collins Street Melbourne Victoria 3000 AUSTRALIA
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Planning Materiality c a S eS inc lu de d in t hiS Se ction 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Anne Aylor‚ Inc. 229 Determination of Planning Materiality and Tolerable Misstatement ot he r c aSe S t h at diScuSS topicS related to thiS Section 5.6 Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . Evaluation of Audit Differences . . . . . . . . . . . . . . . . . . . . . . . Sarbox
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contained in a company’s prospectus.” Do you agree with this statement? Are there any circumstances where a company may be held liable for “blue sky” predictions which are contained in a disclosure document? Question 2 ATT Ltd‚ a biopharmaceutical company‚ has lodged a prospectus with ASIC intending to raise $100 million from investors. The aim of capital raising is to allow the company to develop its range of research and development products. In the company’s prospectus ATT Ltd has provided
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