Your Uncle Bob, a CPA, Has Recently Started Auditing and He

question 23

Essay

Your uncle Bob, a CPA, has recently started auditing and he wants your advice on some tests of sales transactions he is conducting. Bob selected a haphazard sample of 15 sales with a total book value of $75,000. In his sample, he found a total of $500 in net overstatement errors. The total sales balance per book is $10,000,000. Overall materiality for the engagement is $300,000. Tolerable misstatement for sales is $70,000. If the sample results indicate that Bob's best estimate of total misstatement in sales is $35,000, can Bob safely conclude that no additional work is needed in this area? Include in your answer a clear discussion of how sample results are compared to tolerable misstatement.

Identify and explain various judgment strategies, including heuristics, and their impact on decision-making.

Define and differentiate between propositions, concepts, and categories.

Recognize the spreading activation model of memory and its implications for cognitive tasks.

Analyze the effects of priming on recall speed and accuracy.

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Definitions:

Bad-News Portion

The segment of communication specifically designed to convey disappointing or negative information.

Sugarcoat

To make something appear more pleasant or acceptable by concealing its true nature or details.

Digital Media

Content or communication exchanged via digital devices, including text, audio, video, and graphics.

Webcast

A media presentation distributed over the Internet using streaming technology to distribute a single content source to many simultaneous viewers or listeners.