Audit Sampling Case Memo Essay Example | Topics and Well Written Essays - 1250 words

Audit Sampling Case Memo - Essay Example : (1) the existence of the inventory; (2) the rights or obligations of inventory; (3) the completeness of the inventory as stated in the balance sheet; (4) the valuation of inventory on hand, and whether it is presented according to GAAP along with (5) the presentation or disclosure of inventories in the financial statements (Whittington & Pany, 2006). RF= the reliability factor for the specified risk of incorrect acceptance. This is taken from figure 13-5 in Boynton & Johnson (2010), and for a risk of incorrect acceptance of 37% as listed, the reliability factor is 1.0. EF= the expansion factor for anticipated misstatement. This is obtained from figure 13-6 in Boynton & Johnson (2010). With a risk of incorrect acceptance at 37%, the expansion factor is given as 1.15. In Boynton & Johnson (2010), the risk of incorrect acceptance is listed at 37%. There are scenarios that would explain why 37% is chosen instead of higher or lower percentages. An important element mentioned by Whittington & Pany (2006) is the level of overall audit risk. Audit risk is based on the following formula: Audit risk (AR) is the overall allowable audit risk that a material misstatement will remain undetected. Inherent risk (IR) is a risk of a material misstatement in the financial statements, assuming a company had no internal controls. Control risk (CR) is the risk that a material misstatement could occur in an assertion and will not be detected by internal control. Detection risk (DR) is the risk that the auditors’ substantive testing will not find a material misstatement (Whittington & Pany, 2006). The setting of the risk of incorrect acceptance at 37% is not an exact science. If circumstances arise where auditors place inherent risk and control risk at high levels, and do not engage in other tests of the balance assertion, then the risk of incorrect acceptance would have to be set at a low level. However if a decrease in inherent risk or control risk occurs, then a

Individual Report Assignment Example | Topics and Well Written Essays - 2000 words - 1

Individual Report - Assignment Example ts that are usually given a high sense of priority, when analyzing the economic status of a country in relation to its fitness for business activity (Mohr, 2011). In this research, the discussion will be based on an analysis of three major economic indicators; the currency value against the US Dollar, inflation and economic growth rate measured in Gross Domestic Product and how they will affect the multinational company that intends to expand the provision of its services and products to other parts of the global business environment. Economists have asserted that a nation’s economic indicators are usually voluminous statistical information that are provided by governments, non-governmental organizations as well as the economic agencies charged with the responsibility of undertaking economic analyses (Mohr, 2011). This information has proved beneficial to not only local companies, but also multinational companies that aspire to expand their services to these countries. According to the Federal Reserve Bank of the United States, information regarding the country’s Gross Domestic Product has been crucial for the government owing to the fact that it assists in making adjustments of the existing economic policies (Berlatsky, 2013). In this regard, multinational and SME’s are usually subjected to scenario where they have to keep up to date with the existing economic policies in order to adjust their operations. The Federal Reserve Bank of the United States indicates that Gross Domestic Product of a nation is basically the value of services and products within its markets, generated within a specific period of time (Berlatsky, 2013). This information is usually released to the general public on a quarterly basis together with some revisions that may be provided within a period of ten weeks after the real of GDP information. Information regarding this data is usually accompanied with explanatory data that provides reasons for an increase in GDP or the reasons why