Alice Pang is planning the control testing of the accounts payable function in the hardware retailer Bunns and Major. Alice is attempting to determine the appropriate sample size for her tests and is writing a report to the engagement partner of the audit justifying her choices. She has had the opportunity to talk to management at Bunns and Major and tour the facilities. She has also reviewed the working papers from the previous audits and identified factors that have changed from previous years. She notes that the number of accounts payable has increased by 50 percent since last year because Bunns and Major has changed some of its suppliers from large corporate wholesalers to dealing directly with manufacturers.

Overall, Alice believes that the controls in accounts payable are likely to be operating more effectively than in previous years, and she expects a reduction in control deviations. This situation is likely because of the appointment of an additional staff member in the accounts payable department three months after the start of the fiscal year. However, she is recommending that a lower rate of deviation would be acceptable this year because of the increased importance of accounts payable to Bunns and Major's solvency situation in the current economic climate. In addition, she is recommending that substantive testing of accounts payable be less extensive than in past years.