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Sauron [17]
3 years ago
10

The auditors of Dunbar Electronics want to limit the risk of material misstatement in the valuation of inventories to 8 percent.

They believe that there exists a 55 percent risk that a material misstatement could have bypassed the client’s internal control and that the inherent risk of the account is 90 percent. They also believe that the analytical procedures performed to test the assertion have a 41 percent risk of failing to detect a material misstatement.
Required:
a. Briefly discuss what is meant by audit risk, inherent risk and control risk.
b. What level of detection risk is implicit in this problem?
Business
1 answer:
Ksivusya [100]3 years ago
4 0

Answer:

a. Briefly discuss what is meant by audit risk, inherent risk and control risk.

Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.

Audit Risk = Inherent Risk x Control Risk x Detection Risk

Auditors will want their overall audit risk to be at an acceptable level. Inappropriate opinion will result in damages / costs  

Inherent risk is the susceptibility of an assertion to a misstatement that could be material individually or when aggregated with other misstatements, assuming there were no related internal controls.

Control risk is the risk that a material misstatement, that could occur in an assertion and that could be material will not be prevented or detected and corrected on a timely basis by the entity's internal control.

b. What level of detection risk is implicit in this problem?

Detection risk is the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement

In this case the detection risk given is 0.41.

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International Imports (I2) pays an annual dividend rate of 10.40% on its preferred stock that currently returns 13.94% and has a
skelet666 [1.2K]

Answer:

$74.61 per share , decrease.

Explanation:

First calculate value of preferred share if return is  13.94% ;

Value of preferred share =(Annual dividend rate  * Par value)/ Rate of return

Value = (0.1040* 100)/0.1394

Value = 10.40/ 0.1394

Value = $74.61

Next, calculate value of preferred share if return is  18.12% ;

Value of preferred share =(Annual dividend rate  * Par value)/ Rate of return

Value = (0.1040* 100)/0.1812

Value = 10.40/ 0.1812

Value = $57.40

Since the value has gone from $74.61 to $57.40, it means that the value will DECREASE.

3 0
3 years ago
Since your first birthday, your grandparents have been depositing $140 into a savings account every month. The account pays 12%
guajiro [1.7K]

Answer:

The correct answer is: $5,140.80.

Explanation:

Simple Interest is a quick method of calculating the interest charged on a loan or the interest accrued out of an investment. It is determined by multiplying the interest rate by the principal by the number of periods. It is one of the most common methods used in finance to calculate the return on certain investments.

In the example, the number of years considered to calculate the interest is 17 because the 18th year on interest is realized by the end of that year. Thus:  

  • Deposit per year: $140
  • Interest per year: $140 x 12% = $16.80
  • Interest accrued: $16,8 x 17 = $285.60

  • Total savings: (Deposit per year x number of years) + interest accrued
  • Total savings: ($140 x 18) + $285.60
  • Total savings: $5,140.80
5 0
3 years ago
How does a country's GDP help you determine if its economy is strong or weak?
IceJOKER [234]
The GDP means gross domestic product. When it increases then it means the economy is getting stronger or is already strong. If it decreases then it becomes weaker or is already weak.
8 0
3 years ago
Read 2 more answers
Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $370 and has a unit cont
Nataliya [291]

Answer:

794 composite units.

Explanation:

Calculation to determine the firm's break-even point in composite units

First step

Contribution Margin per Composite Unit:

Youth model $700

($140× sales mix of 5 )

Adult model model $4,365

($485× sales mix of 9)

Recreational model $3,210

( $535 × sales mix of 6 )

Contribution Margin per Composite Unit=8,275

($700+$4,365+$3,210)

Now let determine the Break-even Sales in Composite Units using this formula

Break-even Sales in Composite Units = Total Fixed Costs/Contribution Margin per Composite Unit

Let plug in the formula

Break-even Sales in Composite Units = $6,570,000/$8,275

Break-even Sales in Composite Units = $793.9

Break-even Sales in Composite Units = 794 composite units

Therefore the firm's break-even point in composite units is 794 composite units.

4 0
3 years ago
A firm purchased goods on January 27 with a purchase price of $1,000 and credit terms of 2/10 net 30 EOM. The firm paid for thes
alexira [117]

Answer:

$1,000

Explanation:

the journal entry to record the purchase of the goods should be:

January 27, merchandise purchased on account, credit terms 2/10, n/30

Dr Merchandise inventory 1,000

    Cr Accounts payable 1,000

the journal entry to record the payment of the invoice 13 days later should be:

Dr Accounts payable 1,000

    Cr Cash 1,000

since the discount period is over, the invoice should be paid at full amount

5 0
3 years ago
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