The company has adequate internal controls over the

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The company has adequate internal controls over the account  balance Detect risk can be relatively high, thus allowing proper inferences  form indirect information to make conclusions about the correctness  of an account balance The underlying data sued in evaluating the correctness of an  account balance are both relevant and reliable The relationships between the underlying data and the account  balance being evaluated are logical and justified by current  economic conditions o Rigor of the analytic Regression Reasonableness tests Trend analysis Ratio analysis Scanning Application of analytics to substantive testing  o Can be sued when the procedure is more reliable and cost-effective o Designed to provide independent evidence, not replace the client’s  underling estimation process Sampling risk Sampling risks in substantive testing Risk of incorrect acceptance The risk of incorrect acceptance is the risk that the sample supports the  conclusion that the recorded account balance is not materially misstated  when in fact it is materially misstated (i.e. sample results fail to identify an  existing material misstatement). Risk of incorrect rejection The risk of incorrect rejection is the risk that the sample supports the  conclusion that the recorded account balance is materially misstated when  in fat it is not materially misstated (i.e. sample results mistakenly indicate a  material misstatement) Sampling risks in tests of controls Risk of assessing control risk too low
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Tools to gather audit evidence 15:19 The risk of assessing control risk too low is the risk that the assessed level  of control risk based on the sample is less than the true risk based on the  actual operating effectiveness of the control (i.e. sample results indicate a  lower deviation rate than actually exists in the population) Risk of assessing control risk too high  Risk of assessing control risk too high is the risk that the assessed level of  control risk based on the sample is greater than the true risk based on the  actual operating effectiveness of the control (i.e. sample results indicate a  greater deviation rate than actually exists in the population) Efficiency The risk of incorrect rejection and the risk of assessing control risk too high  relate the efficiency of the audit (the auditor does more audit work than is  necessary). When the auditor’s evaluation of an audit sample leads the  auditor to this erroneous conclusion, the application of additional audit 
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