Calgari Clothing Company manufactures high-quality silk ties that are marketed under a number of trademarked names. Joe & Vandervelte LLP has been the companys auditors for five years. Lisa Austen, the senior-in-charge of the audit, has reviewed Calgaris controls over purchasing and inventory, and she determined that a number of controls can be relied upon to reduce control risk. Austen has decided to test two control procedures over purchases and inventory: (1) purchase orders are agreed to receiving reports and vendors invoices for product, quantity, and price; and (2) inventory is transferred to raw material stores using an approved, prenumbered receiving report.

Austen decided to use a nonstatistical sampling approach based on the following judgments for each control procedure and has judgmentally decided to use a sample size of 75 purchase orders for control 1 and 30 receiving reports for control 2.

	Control Procedure
Parameters	1		2
Desired confidence	95	%	90	%
Tolerable deviation rate	7	%	9	%
Expected population deviation rate	2	%	2.5	%

After completing the examination of the sample items, Austen noted one deviation for each control procedure.

Required:

What conclusion should Austen reach about each control procedure?

1)

2)