NRS 430-Concept of Audit Sampling and types of Sampling Risk

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You are an audit manager for Alder Auditing Bureau, a firm that has recently gained two newaudit clients of a similar size.Your audit staff have completed their preliminary investigations of the two clients. Youare reviewing their notes which can be summarized as follows:

Client 1 –Feyaty-Al-Madinah

Feyaty-Al-Madinah is an old-fashioned family company which has been in business for overa thirty years and trades as wholesalers of fruit and vegetables. Its management structure is divided into five layers ranging from supervisor, deputymanager, manager, senior manager and director. The senior managers and directorshave been with the company for many years.Each level of management has clear authority limits set down in the company manual,which also sets out detailed written procedures for every job.Management at all levels generally has an unforgiving attitude to errors andinefficiencies.Most of the systems are paper-based, although the accounting ledgers are maintainedon a computer and there are rigid systems of authorisation before transactions can be processed. Staff turnover in clerical posts and at supervisor and deputy manager level is high.

Client 2 – Alkhalij Agency For Advertising

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Alkhalij Agency for Advertising is a new company set up six months ago. It trades as a website design business and as an advertising agency. Alkhalij Agency for Advertising is run by two brothers who manage the business jointly.Alkhalij Agency for Advertising mostly employs creative people but it does have a small clerical staff todeal with billing and time recording. The approach to work is casual, spontaneous and rather uncontrolled. Error detection is not seen as a priority. The management’s view is that they will deal with errors and problems when they arise. Staff are happy and so staff turnover is low.

Required:in your review of the control environment for each of these clients, what conclusions would you draw about the risk of error arising in the accounts?(3Mark)

Explain the Concept of Audit Sampling and types of Sampling Risk.(1 Mark)

What are the transactions and documents processed through the revenue process? (1 Mark)

You must proofread your paper. But do not strictly rely on your computer’s spell-checker and grammar-checker; failure to do so indicates a lack of effort on your part and you can expect your grade to suffer accordingly. Papers with numerous misspelled words and grammatical mistakes will be penalized. Read over your paper – in silence and then aloud – before handing it in and make corrections as necessary. Often it is advantageous to have a friend proofread your paper for obvious errors. Handwritten corrections are preferable to uncorrected mistakes.

Use a standard 10 to 12 point (10 to 12 characters per inch) typeface. Smaller or compressed type and papers with small margins or single-spacing are hard to read. It is better to let your essay run over the recommended number of pages than to try to compress it into fewer pages.

Likewise, large type, large margins, large indentations, triple-spacing, increased leading (space between lines), increased kerning (space between letters), and any other such attempts at “padding” to increase the length of a paper are unacceptable, wasteful of trees, and will not fool your professor.

The paper must be neatly formatted, double-spaced with a one-inch margin on the top, bottom, and sides of each page. When submitting hard copy, be sure to use white paper and print out using dark ink. If it is hard to read your essay, it will also be hard to follow your argument.