The audit manager has asked you to review the results of some statistical sampling testing, which resulted in 20 per cent of the payables balance being tested. Materiality has been set at €100,000. The testing results indicate that there is a €45,000 error in the sample: €20,000 which is due to invoices not being recorded in the correct period as a result of weak controls and additionally there is a one-off error of €25,000 which was made by a temporary clerk.
What would be an appropriate course of action on the basis of these results?
A) The error is immaterial and therefore no further work is required.
B) The effect of the control error should be projected across the whole population.
C) The company should be asked to adjust the payables figure by €45,000.
D) A different sample should be selected as these results are not reflective of the population.

Question

The audit manager has asked you to review the results of some statistical sampling testing, which resulted in 20 per cent of the payables balance being tested. Materiality has been set at €100,000. The testing results indicate that there is a €45,000 error in the sample: €20,000 which is due to invoices not being recorded in the correct period as a result of weak controls and additionally there is a one-off error of €25,000 which was made by a temporary clerk.
 What would be an appropriate course of action on the basis of these results?
A) The error is immaterial and therefore no further work is required.
B) The effect of the control error should be projected across the whole population.
C) The company should be asked to adjust the payables figure by €45,000.
D) A different sample should be selected as these results are not reflective of the population.

Quizplus · Accepted Answer

The Answer is B

The Audit Manager Has Asked You to Review the Results