Question 5 7 Marks The results of substantive testing of sales invoices at Mahoney Limited...
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Accounting
Question 5 7 Marks The results of substantive testing of sales invoices at Mahoney Limited are as follows: Stratum Error found Sample total value Stratum total value Projected error 1 $14,300 $202,500 $264,800 2 $6,400 $83,400 $157,500 3 $16,200 $125,700 $330,800 Total $36,900 $411,600 $753,100 The three strata correspond to different departntents and the overall tolerable error is set at $78,000. Required: (a) Complete the 'Projected error' column in the table above and show working in the space provided below. (3 marks) (b) With a tolerable error set at $78,000 is the total projected error material? Briefly explain your answer. (2 marks) Question 5 continued over next page Question 5 continued (c) What difference would it make if the tolerable error was set at $65,000? (2 marks) Question 1 10 Marks (a) Define audit risk. (2 Marks) (b) Name and briefly explain the three compondents that make up the audit risk model. (6 Marks) (c) Which components within the audit risk model make up the risk of material misstatement? (2 Marks)
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