Question
15-38 (Objectives 15-4, 15-5, 15-7) For the audit of Carbald Supply Company, Carole Wever, CPA, is conducting a test of sales for 9 months of
15-38 (Objectives 15-4, 15-5, 15-7) For the audit of Carbald Supply Company, Carole Wever, CPA, is conducting a test of sales for 9 months of the year ended December 31, 2019. Included among her audit procedures are the following:
- Electronically re-add the sales journal and trace the balance to the general ledger.
- Review all sales transactions for reasonableness.
- Select a sample of recorded sales from the sales journal and trace the customer name and amounts to sales invoices and the related shipping document.
- Select a sample of shipping document numbers and perform the following tests:
- Trace the shipping document to the related duplicate sales invoice.
- Examine the sales invoice and agree to shipping document, shipping order, and customer order.
- Verify that the customer is included in the customer master file and sale does not exceed authorized credit limit.
- Examine sales file for evidence of internal verification of quantity, price, extensions, and invoice total, and trace the balance to the accounts receivable master file.
- Compare the price on the sales invoice with the approved price list and the quantity with the shipping document.
- Trace the balance on the sales invoice to the sales journal and accounts receivable master file for customer name, amount, and date.
Required
- For which of these procedures can audit sampling for exceptions be conveniently used?
- Considering the audit procedures Wever developed, what is the most appropriate sampling unit for conducting most of the audit sampling tests?
- Complete the sampling datasheet following using attributes or nonstatistical sampling.
- For all tests of controls, assume a TER rate of 5 percent and an EPER of 1 percent.
- For all substantive tests of transactions, use a 4 percent TER and a 0 percent EPER.
- Use a 10 percent ARO for all tests.
- Determine the sample size for each attribute (hint: use table 15-8 to determine the sample size for each attribute).
For the first two requirements, do not just give one-word or one-sentence answers. Please explain and give evidence of your answers.
| DESCRIPTION OF ATTRIBUTES | EPER | TER | ARO | INITIAL SAMPLE SIZE |
| A sales invoice exists for the shipping document selected. (tests of controls) | ||||
| Shipping document agrees with related duplicate sales invoice. (substantive tests) | ||||
| The sales invoice agrees with the shipping document, shipping order, and customer order. (tests of controls) | ||||
| The customer is included in the master file and does not exceed authorized credit limits. (tests of controls) | ||||
| The sales invoice has internal verification of computations. (tests of controls) | ||||
| The sales invoice has the same price and quantity as approved price list and shipping document. (substantive tests) | ||||
| Customer name, amount and date agrees between sales invoice and sales journal and subsidiary ledger. (substantive tests) |
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Accounting Information For Business Decisions
Authors: Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh, Geoff Slaughter, Sharelle Simmons
2nd Edition
0170253708, 978-0170253703
