Define sampling risk and nonsampling risk.
What will be an ideal response?
Sampling risk refers to the possibility that the sample drawn is not representative of the population and that, as a result, the auditor will reach an incorrect conclusion about the reliability of a control, an account balance, or class of transactions based on the sample.
Nonsampling risk is the risk of auditor error and arises from the possibility that the auditor may sample the wrong population to test an assertion, fail to detect a misstatement when applying an audit procedure, or misinterpret an audit result. The uncertainty related to nonsampling risk can be controlled by adequate training, proper planning, and effective supervision.
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The Merchandise Inventory account balance is $52,000. A physical count of inventory reveals that the actual inventory balance is $41,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system.)
A) a $41,000 credit to Merchandise Inventory B) a $52,000 debit to Cost of Goods Sold C) a $11,000 credit to Cost of Goods Sold D) a $11,000 credit to Merchandise Inventory
Consider a coupon bond that pays $150 every year and repays its principal amount of $1,500 at the end of five years. If the annual rate of discount is 7 percent, the present value of the bond is approximately
A. $214.29. B. $808.39. C. $1,684.50. D. $1,742.52.
Which of the following is NOT true of intuitive hypothesis testing?
A) It is defined as when someone uses something he or she has observed to see if it agrees with or refutes his or her belief about that topic. B) Everyone uses intuitive hypothesis testing. C) People do intuitive hypothesis testing all the time to reaffirm their beliefs. D) Only people familiar with statistics use intuitive hypothesis testing. E) People do intuitive hypothesis testing all the time to reform their beliefs to be consistent with reality.
In a short essay, list and discuss four of the ways in which false and misleading advertising may take place.
What will be an ideal response?