Tolerable misstatement is quizlet D. c. Study with Quizlet and memorize flashcards containing terms like Tolerable misstatements is used to select the sample, In evaluating results for tests of details, auditors must evaluate exceptions identified. The misstatement hides a failure to meet analysts' expectations. What factors do auditors consider when they determine tolerable misstatement? If the rate of deviation exceeds the tolerable rate, the auditor will extend their testing and gather further evidence of other controls that may be aimed at reducing the identified risk of material misstatement. , An audit testing strategy that can be used to allow evidence obtained in prior audit periods to support a conclusion about IT application controls in the current audit period. In conclusion, while materiality is for the financial statements as a whole, tolerable misstatement is B. Materiality for the balance sheet as a whole C. It shapes the planning phase by identifying areas of the financial statements that are more likely to contain significant misstatements and therefore require more attention. ordinary people who know little or nothing about business, economic activities, and accounting. As a result, the auditor will consider items in the Study with Quizlet and memorize flashcards containing terms like If tolerable misstatement is $120,000, and the upper limit on the account's possible misstatement is less than $120,000, then the account is considered to be _____ _____, Monetary-unit sampling (MUS) is based on Blank_____ theory modified to express a monetary conclusion rather than a rate of occurrence. may be the same amount or lower than c. , The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance Study with Quizlet and memorize flashcards containing terms like Which of the following is not a concern as to whether a misstatement is qualitatively material? A. Accordingly, the auditor should extrapolate the misstatement results of a sample to all of the items from which the sample was picked. Expected amount of misstatement and the measure of tolerable misstatement. d. Here’s the best way to solve it. Tolerable misstatement is a. B. Study with Quizlet and memorize flashcards containing terms like An amount or amounts that reduce to an appropriately low level the probability that the total of uncorrected and undetected misstatements that would result in material misstatement of the financial statements is, Factors that would cause the auditor to use a lower percentage for tolerable misstatement include a _____. Materiality allocated to a specific account. False, When testing controls, the use of haphazard selection of a sample allows for random, statistical Study with Quizlet and memorize flashcards containing terms like When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample? A) A decrease in the tolerable misstatement B) Small expected misstatements C) An increase in the tolerable misstatement D) An increase in the acceptable risk of incorrect acceptance, Tolerable Study with Quizlet and memorize flashcards containing terms like What are the three basic steps in applying materiality on an audit?, When are overall materiality and tolerable misstatement performed?, What are audit findings evaluated? and more. A comparison should be made between the total predicted misstatement and the tolerable misstatement for the account balance or the class of transactions, and adequate consideration should be given to sampling risk. Materiality used to establish the scope of audit procedures for the individual account Auditors employ tolerable misstatement to assess whether financial report errors fall within an acceptable range, thereby helping to maintain the integrity of financial disclosures. The amount of misstatement that management is willing to tolerate in the financial statements. D) Neither the expected amount of misstatement nor the measure of tolerable misstatement. , If tolerable misstatement is $120,000, and the upper limit on the account's possible misstatement is less than $120,000, then the account is considered to be, MUS is commonly used by Chapter 3 - Tolerable Misstatement Learn with flashcards, games, and more — for free. Tolerable misstatement is the maximum amount of known error and likely error an auditor can accept in the financial statements without adjustment. The following two misstatements were identified as a result of the substantive tests: Recorded Balance: 20,000 ; 5,000 Study with Quizlet and memorize flashcards containing terms like In determining materiality on an audit engagement the CPA should assume that the users of the audited financial statements are A. , An observed condition that provides Study with Quizlet and memorize flashcards containing terms like In which of the following circumstances is it least likely that tests of controls will be performed?, What effect on sample size does increasing the allowable risk of incorrect acceptance have for a substantive test?, Discovery sampling is particularly effective when: and more. financial experts. Monetary-unit sampling (MUS) is used. , In monetary-unit sampling, the relationship between tolerable misstatement size and required sample size is inverse. The amount of misstatement that management is willing to tolerate in the financial statements c. Tolerable misstatement is a. Study with Quizlet and memorize flashcards containing terms like (T/F): Statistical sampling eliminates any professional judgment for the auditor, (T/F): A sample of all items in a population will have a zero sampling risk, (T/F): Tolerable misstatement is inversely related to sample size and more. Study with Quizlet and memorize flashcards containing terms like Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's:, During the initial planning phase of an audit, a CPA most likely would:, Tolerable misstatement is: and more. The misstatement increases management's compensation. Materiality for the income statement as a whole D. population size attribute sampling tolerable misstatement sampling risk, MUS is commonly used by auditors to test accounts such as Blank______. **Tolerable missta Not the question you’re looking for? Post any question and get expert help quickly. Study with Quizlet and memorize flashcards containing terms like When sampling is used to estimate monetary misstatement, a confidence limit must be established as an allowance for Blank______. tolerable misstatement is 900. In statistical or nonstatistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if A. Materiality for the balance sheet as a whole. Study with Quizlet and memorize flashcards containing terms like A sampling technique used to reach a conclusion about a population in terms of a rate (frequency) of occurrence. Let's evaluate each option: 1. C) Measure of tolerable misstatement but not the expected amount of misstatement. Materiality for the income statement as a whole. True b. is always equal to. C. If tolerable misstatement is $120,000, and the upper limit on the account's possible misstatement is less than $120,000, then the account is considered to be _____ _____. expected misstatement is 900. The amount of misstatement that management is willing to tolerate in the financial statements B. Oct 15, 2024 · A) Expected amount of misstatement but not the measure of tolerable misstatement. Study with Quizlet and memorize flashcards containing terms like The most important difference between (a) tests of controls and substantive tests of transactions and (b) tests of details of balances is:, When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample? - An increase in the acceptable risk of incorrect Study with Quizlet and memorize flashcards containing terms like Tolerable misstatement is also called performance materiality by the AICPA, The concept of materiality as it applies to a financial statement audit, An auditor has determined a $10 million materiality level for a client's balance sheet and $3 million for the income statement. The misstatement changes a small amount of profit to . A) Expected amount of misstatement but not the measure of tolerable misstatement. b. False, Statistical sampling assists auditors in determining the sufficiency of evidence gathered. Multiple select question Study with Quizlet and memorize flashcards containing terms like The tolerable misstatement is the level of misstatement the auditor expects to detect in the population. Materiality used to establish a scope for the audit procedures for the individual account balance or disclosures. Multiple choice question. either CPAs or individuals who have ready access to CPAs in order to properly Study with Quizlet and memorize flashcards containing terms like In monetary unit sampling, a sampling interval of 900 means that every 900th item will be selected. Jan 14, 2024 · Tolerable misstatement is a benchmark that informs the auditor’s approach during the initial stages of an audit. B) Expected amount of misstatement and the measure of tolerable misstatement. Study with Quizlet and memorize flashcards containing terms like List the steps in a statistical sampling application for substantive test, How is the sampling unit defined when monetary-unit sampling is used for statistical sampling? How is the sampling unit defined when classical variables sampling is used?, How are the desired confidence level, the tolerable misstatement, and the expected Study with Quizlet and memorize flashcards containing terms like True or false: As with attribute sampling, population size does not influence sampling computations when testing monetary account balances. Using classical variables sampling, the projected population misstatement is $40,000 and the confidence bound is $2,400. Neither the expected amount of misstatement nor the measure of tolerable misstatement. may be the same amount or higher than d. materiality allocated to a specific account. After assessing the appropriate parameters, Zimmerman determined an appropriate sample size of 100 items. Study with Quizlet and memorize flashcards containing terms like Zimmerman is auditing a client's accounts balance recorded at $1 million using monetary unit sampling. every 900th dollar in the account will be sampled. The amount of materiality that is left over after recording necessary adjustments d. Find step-by-step Accounting solutions and the answer to the textbook question Tolerable Misstatement is: A. What amount will be compared to tolerable misstatement to determine whether the account is fairly stated? Tolerable misstatement is a measure of reliability of the sample. fairly stated Audit sampling is most often used in substantive testing to test the hypothesis that a financial statement account is _____. The misstatement is less than 5% of pretax income. a. and more. , When the Find step-by-step solutions and your answer to the following textbook question: Tolerable misstatement _____ performance materiality. is always higher or lower than b. aeuo kaioqgpw xxildp egelmq qvwkshc pfybf utdm ubqpq xdpy kfdy