Barry Heer is the founder and controlling shareholder of Heer's Office Interiors (HOI). HOI has grown quickly, selling mid to high end office furniture to a variety of commercial and industrial customers in British Columbia.

 

In spite of this sales success, profitability has not met expectations. Barry has recently realized that they need to increase pay and improve conditions for the accounting staff to avoid having periods with unqualified staff, particularly for sales invoice processing. The staff shortages have resulted in sluggish performance in processing invoices, sending out customer statements, and collecting cash from account customers. In addition, there have been numerous mistakes in processing sales invoices, some of which have been discovered after customer complaints.

 

You are the audit senior for the audit of HOI, and you have decided to take a substantive audit approach for sales revenue. All sales invoices, for the last five years are kept in the local warehouse. Customer purchase orders and shipping reports, are kept in offsite storage, and will require 48 hours notice to access. Barry is concerned about the costs of accessing and retrieving these records, so he as asked you to be efficient and request only the files that you must have for your sampling.

Required

a. Based upon your understanding of the risks of material misstatement of HOI sales revenue, which account assertion(s) are most at risk? Explain your reasoning.

b. To address your identified at risk account assertion(s), you intend to make a statistical sample. Which documents do you want to request from storage? Why?