Question

Discuss each of the six possible courses of action the auditor can take when he or she has concluded that the population is misstated by more than a tolerable amount.

Answer 1

The six possible courses of action which an auditor can take when has concluded that the population is misstated by more than a tolerable amount are discussed as below:

-- Taking no action until tests of other audit areas are complete: When offsetting misstatements are found in other areas of the audit, the auditor can conclude that it is acceptable population.

-- Increase the sample size: With an increase in sample size, the sampling error is decreased when the rate of misstatements in the expanded sample, their dollar amount, and their direction are similar as it is in the original sample. It may result to an acceptable population.

-- Perform expanded audit tests in specific areas: The auditor may perform expanded audit tests in certain areas which means restricted to the area where the misstatements are occurring.

-- Request the client to correct the population: The auditor may request client correct each item in a population for an acceptable population.

-- Adjust the account balance: In few circumstances, when the client corrects the misstatements discovered by the auditor, then account's book value may become acceptable.

-- Refuse to give an unmodified opinion: If none of the the above discussed courses of action results to population which is acceptable, the auditor may issue either a qualified or an adverse opinion.