2.99 See Answer

Question: Northwest Bank (NWB) has banking operations in

Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans. NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material. Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication. PART A The following computation was performed last year.
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

The following information was available for an analysis of the current audit year.
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

REQUIRED – PART A [1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported? Yes No Please briefly explain your answer. [2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

PART B Do NOT begin this part of the case until instructed to do so In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?


Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?


Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

REQUIRED – PART B [1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported? Yes No Please briefly explain your answer. [2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
Northwest Bank (NWB) has banking operations in 35 communities in the states of Washington, Oregon, and Idaho. Headquarters for the bank are in Walla Walla, Washington. NWB’s loan portfolio consists primarily of agricultural loans, commercial loans, real estate loans, and loans to individuals. Credit-granting authority is primarily centralized in Walla Walla; however, certain seasoned loan officers have decision authority for small loans in their local area. Loan portfolio performance, monitoring, and ongoing credit quality assessments are performed in Walla Walla for all loans.
NWB has been an audit client for three years. Because of NWB’s strong controls over bank loans, the audit team places high reliance on controls (i.e., control risk is assessed as low). The audit approach calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of substantive analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. Total reported interest income for 2018 is $35,337,204, and reported net income for the bank is $12,484,000. A misstatement of $525,000 is considered material.
Last year, in addition to comparing the 2017 interest income to 2016 interest income, the audit team also developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. Last year’s audit file indicates that the average loan volume agrees to numbers tested elsewhere in the audit file and that the interest rates used to compute the weighted average rate were comparable to rates published in a Washington State Banking Commission publication.
PART A	
The following computation was performed last year.
The following information was available for an analysis of the current audit year.
REQUIRED – PART A
[1]As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure, how likely is it that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

PART B	Do NOT begin this part of the case until instructed to do so
In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the “Individual and Other Loans” category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2017 and December 31, 2018. Recall that materiality for this area is $525,000.
REQUIRED – PART B
[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Can you accept 2018 interest income as reported?
Yes		No		Please briefly explain your answer.
[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2018 interest income is materially misstated?
[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:
[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:
[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3.
[a] Considering common judgment tendencies and traps, what might explain the difference?
[b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?

[5] Most auditors and students who complete Part A and Part B have a lower assessment in Part B question 4 than they do for Part A question 3. [a] Considering common judgment tendencies and traps, what might explain the difference? [b] Assuming the difference is evidence of judgment bias(es), what steps may help to mitigate the bias(es)?


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> Twelve bicycles are available for use at the student union. Use Table 1, to select 4 of them for you and three of your friends to ride today.

> A survey of 451 men revealed that 144 men, or 3 1.9%, wait until Valentine's day or the day before to purchase flowers. Identify a statistical population and the sample.

> It was 9:30 A.M. on a Monday morning when the call came through. “Hi Dr. Mitchell, do you have a minute?” “Sure,” the professor replied. “I am one of your former students, but if you don’t mind, I would prefer to remain anonymous. I think it is best for

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> Banking regulators announced in early 2015 a greater focus on evaluating ethical culture as part of their regulatory examination of a bank’s health. In a February 2015 speech, Thomas Baxter, Executive Vice President and General Counsel

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> RedPack Beer Company is a privately-held micro brewery located in Raleigh, North Carolina. Bank loan covenants require that RedPack submit audited financial statements annually to the bank. Specifically, the bank covenants contain revenue and liquidity m

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> You are the new information technology (IT) audit specialist at the accounting firm of Townsend and Townsend, LLP. One of the audit partners, Harold Mobley, asked you to evaluate the effectiveness of general and application IT-related controls for a pote

> St. James Clothiers is a high-end clothing store located in a small Tennessee town. St. James has only one store, which is located in the shopping district by the town square. St. James enjoys the reputation of being the place to buy nice clothing in the

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> Is there ever a case in which illegitimate tasks should be tolerated or “rightfully” given? Explain your answer.

> When is work performed by individuals preferred over work performed by teams?

> What are the major job attitudes?

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> How do you overcome the potential problems of cross-cultural communication?

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> How would you have acted had you been in a similar situation?

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> In what way could the mine management have provided support to him prior to his wrongful act?

> Does behavior always follow from attitudes?

> What should Sipho have done differently?

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> What is the difference between automatic and controlled processing of persuasive messages?

2.99

See Answer