For the examination of the financial statements of Scotia Inc., Rosa Schellenberg, a public accountant, has decided to apply nonstatistical audit sampling in the tests of sales transactions. Based on her knowledge of Scotia's opera¬ tions in the area of sales, she decides that the estimated pop¬ ulation deviation rate is likely to be 3 percent and that she is willing to accept a 5 percent risk that the true population exception rate is not greater than 6 percent. Given this infor¬ mation, Schellenberg selects a random sample of 150 sales invoices from the 5,000 prepared during the year and exam¬ ines them for exceptions. She notes the following exceptions in her working papers. There is no other documentation.

Required

a. Which of the following should be defined as an excep¬ tion?

b. Explain why it is inappropriate to set a single acceptable TER and EPER for the combined exceptions.

c. State the appropriate analysis of exceptions for each of the exceptions in the sample.

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INVOICE NO. 5028 6791 6810 7364 7625 8431 8528 8566 8780 9169 COMMENT Sales invoice had incorrect price but a subsequent credit note was sent out as a correction. Voided sales invoice examined by auditor. Shipping document for a sale of merchandise could not be located. Sales invoice for $2,875 has not been collected and is six months past due. Client unable to locate the printed duplicate copy of the sales invoice. Invoice was dated three days later than the date of the shipping document. Customer purchase order is not attached to the duplicate sales invoice. Billing is for $100 less than it should be due to a pricing error. Client unable to locate the printed duplicate copy of the sales invoice. Credit not authorized, but the sale was for only $7.65.