ACC522 Advanced Audit Issues
Unit 8 Assignment
This is a 3 part assignment
Case 11: Sampling for Variables – Difference Estimation
Answer the following questions below. Use your text and other available resources to provide
1) Carole Mitchell attempted to use judgmental sampling to verify the client’s accrual in this case while Dan Cline opted for statistical sampling. What are the advantages and disadvantages of each approach? Will a statistical sample usually be smaller than a non-statistical sample?
2) Exhibit 11-2 presents the results of Mitchell’s initial testing. Was Cline correct in seeking additional audit evidence? Include in your answer the concept of sufficiency of audit evidence.
3) Statistical sampling is occasionally criticized for preventing the auditor from introducing personal judgment into a particular test. Is this assertion valid? How much knowledge of statistical sampling should the auditor have? Is it typical to obtain assistance from a specialist in developing a sample?
4) Statistical sampling has also been criticized for being a slow, time-consuming process relative to judgmental sampling. Is this assertion valid?
5) An auditor may utilize sampling for attributes in some tests and sampling for variables in others. How is the decision made as to which of these methods should be applied? Is it appropriate to use a cost-based decision when considering the independent auditors’ responsibility?
Case 12: Review of Subsequent Events
1) Prepare the auditor’s report that you believe is warranted for the Lakeside Company’s 2012 financial statements based on the information contained in the first 11 cases. Lakeside issues comparative financial statements. Assume that any facts not explicitly covered in these cases would not influence the decision as to the type of opinion to be rendered.
2) Separately, provide an explanation why you issued the report that you did.
Case 13: Consulting and other Services
Apply your research. Use your text and other available resources to provide well-reasoned responses.
Scenario: The firm of Abernethy and Chapman was asked to do consulting work for Lakeside that is completely separate and unrelated to the audit of the financial statements. Write a report discussing the potential conflict of interest when an auditor does consulting work for an audit client. Does this relationship cause the independence of the auditor to be violated? Why or why not? Since the Enron debacle, how has the accounting profession dealt with this issue?