1) questionnaire, provide the following four pieces of information:

a) Identify what transaction-related audit objective is supported by each control if it is effective. Be sure to explain how the control supports the objective.

b) Describe one test of controls auditors could use to test the effectiveness of the control.

c) Identify the possible misstatement that might occur if each control were not effective, to include the accounts involved and how whether they would be over or understated, and explain how the misstatement would result from the control weakness.

d) Describe on test of substantive audit procedure that might determine if a material misstatement exists due to the failure of the control. Make sure you answer is clear about how the test would work.

Fill in the following table to present your answer.

Hint: Your answers need to be clear about how the control procedure implied by each question would work and what transaction-related audit objective(s) would be supported by that control procedure as well as how your tests would map onto that objective and test for the specific material misstatement(s) you mention in c). In general, everything on each row needs to fit together.

1)

Question	Audit Objective	Control Test	Misstatement	Balance Test
1. Are entries in the sales journal are timely recorded in the accounts receivable master file?
2. Are all individuals responsible for handing cash collections independent of accounting and shipping functions?
3. Is the numerical sequence of bills of lading accounted for to identify duplicates or missing documents?
4. Are sales invoice amounts independently verified for correctness?
5. Are entries in the sales journal restricted to those that are supported by a valid bill of lading?

2) Describe the steps auditors use when using sampling to test controls or substantively test transactions; discuss the activities that go on in each step; and why they are important to the sampling process.

a) State the objectives of the test. Include a comment on the role audit objectives play in this step.

b) Define attributes and exception conditions

c) Define population

d) Define the sampling unit

e) Determine sample size, which includes determining specifying the TER, ARO, and EPER. For the first three items, describe what it measures and now it affects sample size. For sample size, describe how the sample size is calculated for both statistical and non-statistical sampling.

i) TER

ii) ARO

iii) EPER (Include a short discussion of how auditors set this parameter)

iv) Sample size. Be clear on the differences between how sample size is determined from the above parameters for statistical versus non-statistical sampling.

f) Select sample items. Also, differentiate between selection methods (i.e., random, systematic, haphazard, block, and judgmental) and which ones apply to statistical and which to non-statistical sampling.

g) Perform audit procedures

Hint: This is a straight forward step and doesn't require a lot of explanation.

1) For each of the following questions taken from an internal control evaluation questionnaire, provide the following four pieces of information: a) Identify what transaction-related audit objective is supported by each control if it is effective. Be sure to explain how the control supports the objective. b) Describe one test of controls auditors could use to test the effectiveness of the control. c) Identify the possible misstatement that might occur if each control were not effective, to include the accounts involved and how whether they would be over or understated, and explain how the misstatement would result from the control weakness. d) Describe on test of substantive audit procedure that might determine if a material misstatement exists due to the failure of the control. Make sure you answer is clear about how the test would work. Fill in the following table to present your answer. Hint: Your answers need to be clear about how the control procedure implied by each question would work and what transaction-related audit objective(s) would be supported by that control procedure as well as how your tests would map onto that objective and test for the specific material misstatement(s) you mention in c). In general, everything on each row needs to fit together. 1) 1 Question Audit Objective Control Test 1. Are entries in the sales journal are timely recorded in the accounts receivable master file? 2. Are all individuals responsible for handing cash collections independent of accounting and shipping functions? 3. Is the numerical sequence of bills of lading accounted for to identify duplicates or missing documents? 4. Are sales invoice amounts independently verified for correctness? 5. Are entries in the sales journal restricted to those that are supported by a valid bill of lading? 2 Misstatement Balance Test 2) Describe the steps auditors use when using sampling to test controls or substantively test transactions; discuss the activities that go on in each step; and why they are important to the sampling process. a) State the objectives of the test. Include a comment on the role audit objectives play in this step. b) Define attributes and exception conditions c) Define population d) Define the sampling unit e) Determine sample size, which includes determining specifying the TER, ARO, and EPER. For the first three items, describe what it measures and now it affects sample size. For sample size, describe how the sample size is calculated for both statistical and non-statistical sampling. i) TER ii) ARO iii) EPER (Include a short discussion of how auditors set this parameter) iv) Sample size. Be clear on the differences between how sample size is determined from the above parameters for statistical versus non-statistical sampling. f) Select sample items. Also, differentiate between selection methods (i.e., random, systematic, haphazard, block, and judgmental) and which ones apply to statistical and which to non-statistical sampling. g) Perform audit procedures Hint: This is a straight forward step and doesn't require a lot of explanation. 3 h) Generalize from the sample to the population. Discuss any differences between statistical and non-statistical sampling. Hint: Be clear on how this is done for both sampling methods. i) Analyze exceptions Hint: Think about why the auditor doesn't just project them sample to the population and make the call on whether the control is working or not based simply on that projection. j) Decide the acceptability of the population. Include some discussion of the decision as well as alternatives if the decision rules calls for rejection of the control. Hint: Describe the decision rule auditors used to determine of the control being tested is working as designed or not. Then discuss what options are open to the auditor if the decision rule leads to a conclusion that the control isn't working. 4