You Are Working on the Testing of Internal Controls Over

question 13

Essay

You are working on the testing of internal controls over price changes in the inventory system.You completed the controls testing to determine whether all price changes were approved by the senior accountant,by reference to master file change forms.In order to place reliance on this control,your audit supervisor has decided that the error rate in the population should be less than 1%.When you calculated your sample size,you used a confidence level of 90% and predicted an error rate of less than one percent.Based on these decisions,you examined 150 inventory price master file change forms.In your testing you uncovered two deviations.Based on these results,you calculate that the actual error rate in the population could be as high as 2.33%.
Required:A)What actions are available to you regarding your planned reliance on the master file change controls? B)What are the advantages and disadvantages of each action? C)How would you decide which action to take?

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Definitions:

Unconscious Pattern

Behaviors, thoughts, or emotions that operate below the level of conscious awareness, influencing an individual's actions and reactions.

Individuation

Individuation refers to the psychological process of integrating the conscious and unconscious parts of oneself, leading to a whole and unique individual identity.

Cultural Bias

The inclination to judge people or traditions based on the standards and customs of one's own culture, which can affect perception and decision-making.

Spirituality

The quality or state of being concerned with religion or religious matters; it can also encompass personal growth, inner peace, and a connection to something greater than oneself.