As a new audit staff member of Namtip & Associates CPAs, you have been assigned to a long-time audit client, SFA. Because of your recent training in audit sampling you will be assigned to assist in the sampling applications.

One of your assignments on this client is to assist in the performance of tests of controls over cash disbursements from the Bank A account. For the year to date, SFA, has received 21,236 vendor invoices for items purchased and issued 18,972 checks in payment of most of those invoices. It has been decided to use statistical sampling in the performance of tests of controls, also known as, sampling for attributes, over cash disbursements.

1. Using the appropriate attached tables, what is the minimum sample size for each of the cases given the stated parameters below?

Case	Risk of Assessing Control Risk Too Low	Tolerable Deviation Rate	Expected Population Deviation Rate
A	5%	7%	2.00%
B	5%	9%	2.00%
C	5%	7%	3.00%
D	10%	7%	2.00%
E	10%	7%	1.50%

2.

a. What impact does a change in the Risk of Assessing Control Risk Too Low (overreliance) on the sample size? Indicate which cases above would illustrate your answer.

b. What impact does a change in the Tolerable Deviation Rate on the sample size? Indicate which cases above would illustrate your answer.

c. What impact does a change in the Expected Population Deviation Rate on the sample size? Indicate which cases above would illustrate your answer.

3. This part is independent of your answers in 1 and 2 above. Another staff associate completed the worksheet presented on the next page showing the checks from Bank Z which had been selected for testing and the results of the actual test of control. Unfortunately, before the other staff associate could complete the evaluation of the test, she was seriously, but not life-threatening, injured (compound broken femur) in the CPA firms annual softball game. You are required to complete the evaluation, showing the formulas used and supporting calculations where appropriate, by answering the following questions:

a. What is the sample deviation rate?

b. Using the appropriate tables, what is the upper deviation rate?

c. What would your conclusion be based on the results of your tests of controls and your evaluation in 3a. and 3b. above? Why? Be specific.

SFA

Cash Disbursement Tests of Control

For the Year Ended December 31, 2016

Objective: To determine whether the payee listed on the Bank Zs checks was the same as the payee on the invoice.

Parameters: Risk of assessing control risk too low (overreliance) 10%, Tolerable Deviation Rate 8%, Expected Population Deviation Rate 5%

Check Number	Check Payee equal Invoice Payee	Check Number	Check Payee equal Invoice Payee	Check Number	Check Payee equal Invoice Payee	Check Number	Check Payee equal Invoice Payee	Check Number	Check Payee equal Invoice Payee
2052860		2056887		2061214		2063992		2067947
2052917		2056927		2061222		2064362		2068294
2052943		2056978		2061319		2064652		2068343
2053060		2057683		2061323		2064707		2068520
2053263		2057687		2061343		2065153		2068882
2053382		2058043		2061528		2065165		2069094
2053425		2058264		2061549		2065293		2069239
2053452		2058544		2061585		2065297		2069356
2053502		2058560		2061600		2065352		2069711
2053513		2058652		2061632		2065384		2069802
2053663		2058975		2061684		2065530		2070171
2053725		2058977		2061766		2065568		2070181
2053835		2059250		2061813		2065575		2070396
2053867		2059263		2061879		2065606		2070407
2054278		2059620		2061898		2065680		2070497
2054360		2059781		2061903		2065829		2070591
2054396		2059939		2062510		2065901		2070650
2054677		2060090		2062560		2066558		2070658
2054686		2060194		2062568		2066761		2070959
2055056		2060198		2062664		2066851		2070987
2055422		2060428		2062666		2067084		2071048	B
2055533		2060547		2062668		2067125		2071190
2055534		2060611		2062866		2067197		2071203
2055702		2060621	A	2062946		2067263		2071263
2055728		2060735		2063067		2067277		2071267
2055778		2060773		2063067		2067353		2071291
2055864		2060813		2063070		2067492		2071311
2056078		2060985		2063121		2067651		2071482
2056768		2060992		2063281		2067692		2071518
2056769		2060998		2063373		2067719		2071543
2056797		2061077		2063665		2067847		2071653
2056819		2061123		2063964		2067947		2071695