Mr. Howe, a Junior Partner of the CPA firm Dewey, Cheatem, & Howe (DCH), wants you to combine and discuss the following issues into a single coherent 1½ page training memo for new audit assistants:
1) Audit risk is a key consideration and guide to planning an audit - explain why?
2) List the key components of the Audit Risk Model (ARM) and discuss how they interact?
3) How can well-structured or judicious statistical sampling cost-effectively assist with estimating the components of the Audit Risk Model and/or resolve an unsatisfactory outcome of that model? and
4) Discuss the key strengths of and key differences between random sampling, haphazard sampling, and judgement sampling and how those differences might affect the discussion in part 3.