b. c.

DR vs AE (- Relationship)
i. both tests of control and substantive procedures
1. If no test of control are performed TYPE OF TEST
AR = IR x CR x DR TOC - FIXED
5% = 85% x 100% x DR TOC - VARIABLE
0.05 = 0.85 x 1 x DR ST - FIXED
DR = 5.88% ST - VARIABLE
TOTAL HOURS

2. If there is tect of control are performed ii. substantive procedures only

AR = IR x CR x DR TYPE OF TEST
5% = 85% x 35% x DR ST - FIXED
0.05 = 0.85 x 0.35 x DR ST - VARIABLE
DR = 16.8% TOTAL HOURS

Answer for explanation:

Based on the calculation, it is more time efficient to use bo
Answer in B indicates that higher detection risk if both proc
and therefore a lower number of tests to be performed in
 d.

control and substantive procedures 1. If use SP/ST

NO OF TESTS x RATE TIME REQUIRED (HOUR) - when CR is high
2.5 - when client internal control procedure is not reliable
50 * 0.3 15 - when client have SOP but never perform
1.5 - small number of transaction / size of company is very small
55 * 0.25 13.75
32.75 2. When use combo
- when CR is low
procedures only - when client internal procedure is reliable
NO OF TESTS x RATE TIME REQUIRED (HOUR) - when client have SOP and perform them
1.5 - huge number of transaction / size of compeny is big or huge
140 * 0.25 35
36.5

alculation, it is more time efficient to use both tests.

dicates that higher detection risk if both procedures are used
a lower number of tests to be performed in total
ocedure is not reliable

size of company is very small

size of compeny is big or huge