Employees at Stuart Consulting Services prepare monthly time sheets allocating their work hours to various client projects. Time sheets are prepared online and sent to the supervisor for approval. The supervisor checks a box indicating approval of the hours and routes the time sheet to the payroll department to be processed. The payroll department checks to determine that all time sheets have supervisory approval (indicated by the check mark) before it makes the pay ment. Time sheets lacking the approval check should be returned to the supervisor.

a. What is the purpose of supervisory approval for the time sheets? How could the financial statements be misstated if the time sheet is not approved?

b. What is the assertion related to the internal control?

c. Prepare a sampling plan to test the control. Assume the acceptable risk of over reliance is 5%, the tolerable deviation rate is 15%, and the expected population deviation rate is 3.5%.

d. Explain how your sampling plan would change if the internal control test was done as a test of internal controls over the financial reporting process.

e. The accounting firm has determined that the number of tolerable deviations for the internal control test is zero deviations. Explain how you will evaluate the results of your sample. State clearly the possible conclusions from your tests.

f. Can this internal control test be performed as a dual-purpose test? Explain your answer.

g. How will you control sampling risk and nonsampling risk in the test?

h. Will you perform a statistical test or nonstatistical test? Explain your answer.

How will your sample differ if you perform a statistical test instead of a non statistical test?

i. Explain why an accounting firm would prescribe sample sizes rather than per mitting each individual auditor to determine it.