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Question - Substantive Procedures and the Financial Statement Audit
Imagine that you are a new auditor scheduled on a year-end audit engagement. Your senior has instructed you to test the Accounts Receivable account. The account is large and contains many customer balances, so you have been instructed to use sampling techniques for your testing.
Required:
1 - Describe the audit risk model explaining the relationships of tests of details of balances detection risk and analytical procedures detection risk.
2 - What is the detection risk related to your task of auditing Accounts Receivable?
3 - Does the risk of incorrectly rejecting the Accounts Receivable balance affect your audit risk when using the audit risk model? What negative impact does incorrect rejection have on the audit?
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
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