[lucretia123]

ok – so I’ve gotten myself crazy confused…is Control Risk from the Audit Risk Formula (AR=IC*CR*DR) the same Control Risk from Attribute Sampling (Expected Deviation/Tolerable Deviation / Assessed Control Risk Level)? If not, can someone please (pretty please) clarify this for me so I can finally get this straight in my head?

Thank you!

BEC - Passed AUD - Passed REG - Passed FAR - Passed
It feel surreal to be done with the exams! I think it is still sinking in.

[rbcpa]

Lucretia123,

Yes both the CR is the same. in the Audit Risk Formula, as you know the auditor can only control Detection Risk and Control Risk & Inherent Risk exist independent of the audit. If the controls appear to be working fine, the auditor can do less testing. If they are not reliable, the auditor will rely more on substantive testing.

As far as sampling goes, its the same way. Attribute sampling is a sampling for attributes within the system, such as a deviation or an error that needs to be debunked. so if the Assessed Control Risk is low, the auditor can rely on the sample that it is not flawed, if Controls are not working properly it leads to a higher sampling risk.

Hope this helps, and I didn't confuse you too much. Good luck on your exam, you can do this!

BEC - PASSED
AUD - PASSED
REG - PASSED
FAR - PASSED

[lucretia123]

That helps but I have a follow-up clarification item – for Attribute Sampling, the Control Risk level is inversly related to the sample size so if Control Risk is low then the Sample size would need to be larger which is counter-intuitive to me because what you said “Assessed Control Risk is low, the auditor can rely on the sample that it is not flawed” which to me means the same would not need to be larger. I'm pretty sure there is just one piece missing before I go “ahhhh, that makes sense”. 🙂

BEC - Passed AUD - Passed REG - Passed FAR - Passed
It feel surreal to be done with the exams! I think it is still sinking in.

[Anonymous]

I actually think there is a direct relationship between risk and sample size. In the Audit Risk formula, as RMM increases so must the sample size. Consequently an increase in CR would increase RMM.

There is direct relationship with sample size regarding expected misstatements, population variability and the assessed level of risk. There is an inverse relationship regarding sample size with tolerable misstatements and the acceptable level of risk.

That's how it makes sense to me . . . but maybe I'm missing a piece in the puzzle.

[Futile]

The risk of assessing control risk too low is your detection risk, not your control risk. That is why the relationship is inverse.

CPA exam: Done!

Thank You, Lord.

[lucretia123]

Futile – thank you, that was the piece of information that I was missing. I was trying to equate the two and that was causing me problems and clearly they are very different components.

CPAorBust2013 & rbcpa – what you guys was saying was making perfect sense. I was confused that the Risk of Assessing Control Risk too low/high was in fact the Dection Risk and not the same Control Risk trying to be employed in both situations.

I love the CPA Exam Forum!

BEC - Passed AUD - Passed REG - Passed FAR - Passed
It feel surreal to be done with the exams! I think it is still sinking in.

[Author]

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