# Audit Hypothesis Model

## Terms

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- Step 8
- Figure out the Ur factor based on reliability level
- Step 18
- Determine whether the sample evidence supports the fair statement of the client's book value
- Step 11
- Calculate required sample size = ((Ur x SD x N)/A)squared
- Step 14
- Analyze errors noted in the sample and the causes
- Step 13
- Perform audit procedures on sample items selected for substantive tests
- Step 19
- If evidence does not suppoer fair statements, request a reevaluation of the account balance, and then reaudit to see if it falls within the decision inteval
- Step 7
- Set the risk of incorrection rejection at 5% or lower ( this is a complement of reliability)
- Step 16
- Calculate estimated audited value
- Step 9
- Define materiality for each account balancce, judgement determined based on different factors
- Step 4
- Test control risk, no need if no or weak internal controls
- Step 10
- Determine amount of tolerable error to place in the sample size formule, tolerable error is based on the risk of incorrect rejection, use the table to set multiplication factor (5% = .543)
- Step 15
- Calculate projected error A1= Ur x SE x N
- Step 1
- Make preliminatry assessment of control risk
- Step 12
- Randomly select the additional sample items using random number tables or systematic selection
- Step 6
- Define audit risk at 10% or lower (usually 5%), and calculate the risk of incorrect acceptance
- Step 2
- Decide which controls to [lace reliance on to limit substantive testing.
- Step 17
- Calculate a desicion interval or precision interval (EAV plus or minus projected error)
- Step 5
- Make final evaluations of internal control risk for each class if transactions, the risk percentage is proportional to the chance that there is enough error to create a material misstatement in the account balance
- Step 3
- Set Desired Reliability level and tolerable rate for complance tests (usually 95% reliability and 5% tolerable rate)