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Introduction:

When performing audit testing, internal auditors must consider the risk that their sample may lead to incorrect conclusions about the accuracy of account balances.

Understanding Incorrect Acceptance Risk:

This risk refers to the possibility that the sample used might support the conclusion that the recorded account balance is not materially misstated when, in fact, it is. This is a type of sampling risk that auditors need to mitigate through proper sampling techniques and sufficient sample sizes.

Options Analysis:

Option A: Incorrect rejection risk is the risk that the sample leads to the conclusion that the account balance is materially misstated when it is not.

Option B: Incorrect acceptance risk directly addresses the concern described, where the sample fails to detect a material misstatement.

Option C: Tolerable misstatement risk relates to the maximum error in a population that the auditor is willing to accept.

Option D: Anticipated misstatement risk is not a standard audit term and does not describe the risk in question.

Conclusion:

The auditor’s concern best describes the incorrect acceptance risk, which is the risk of concluding that the account balance is accurate based on a sample when it is actually misstated.

Year-end inventory valuation should include all goods owned by the company, regardless of their location. This includes goods for sale on consignment at a consignment shop, as these items remain the property of the company until sold. Goods sold FOB shipping point and goods purchased FOB destination that have not yet been received are not included, as ownership has transferred or not yet been acquired respectively. Goods on consignment that the company is trying to sell for others are also excluded because the company does not own them

A control weakness occurs when there is a deficiency in internal controls that could allow errors or fraud to occur. While the act of buyers promptly updating the vendor listing might seem efficient, it could bypass necessary oversight and approval processes. This could lead to unauthorized or inappropriate vendors being added, increasing the risk of fraud or favoritism. Effective internal control requires that such updates be reviewed and approved by an independent party to ensure accuracy and appropriateness.

Introduction:

When verifying the validity of activities reported by a grantee, it is essential to gather evidence that the project was executed as intended and within the defined scope.

Effective Verification Methods:

A site visit allows the auditor to observe firsthand the activities and projects funded by the grant, ensuring they align with the grant's objectives and scope.

Options Analysis:

Option A: Visiting the grantee provides direct evidence of the project execution and alignment with the grant scope.

Option B: Verifying the final report against the initial budget request ensures financial compliance but does not confirm actual project activities.

Option C: Reconciling general ledger accounts verifies financial records but not the execution of activities.

Option D: Interviewing corporate affairs employees provides insight but not direct evidence of project execution.

Conclusion:

The best method to confirm the validity of the activities reported by a grantee is to visit the grantee and assess whether the project execution aligns with the defined grant scope.

Herzberg's Two-Factor Theory, also known as the Motivation-Hygiene Theory, distinguishes between motivators and hygiene factors. Motivators, which are related to job content, lead to higherjob satisfaction and are intrinsic factors such as achievement, recognition, responsibility, and advancement. In contrast, hygiene factors, which are related to job context (e.g., salary, status, work conditions), do not lead to higher satisfaction but can cause dissatisfaction if missing.