. Assume you are the auditor for AirCon Company. You are concerned that your cli
ID: 2331122 • Letter: #
Question
. Assume you are the auditor for AirCon Company. You are concerned that your client is creating invoices for fictitious sales and you need to verify that all sales invoices are accompanied by shipping documents. During the year under audit, AirCon issued 20,000 sales invoices. You are interested in finding one fictitious sales invoice assuming that there may be as many as 100 fictitious invoices for the year under audit. Required: a. What is the appropriate sample size assuming you choose a 5% risk of assessing control risk too low? b. Assume instead that you suspect there are as many as 200 fictitious sales invoices. What is the appropriate sample size assuming you choose a 10% risk of assessing control risk too low?
Explanation / Answer
The risk of assessing control risk too low is concerned with effectiveness of audit test. It represents the riskthat an audit sample supports the conclusion that a material misstatement doesnot exist when infact a material misstatement does exist.If the riskof assessing control risk too low increases then the size of sample should be decreased.
a. the appropriate sample size would be
20000/100=200
b. the appropriate sample size would be
20000/200=100
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