Control testing

PROBLEM OBJECTIVE:THIS COMPREHENSIVE PROBLEM CONCERNS THE SALES/ ACCOUNTS RECEIVABLE /CASH RECEIPTS APPLICATION OF A PRIVATE MANUFACTURING COMPANY.

BASED ON THE INFORMATION PROVIDED, YOU WILL PERFORM ASIMULATED TEST OF CONTROL TO DETERMINE OPERATING EFFECTIVENESS AND RESULTANT DETECTION RISK FOR SUBSTANTIVE TESTS THE CLIENT: AT THE BEGINNING OF THE YEAR IT INSTALLED A NEW SYSTEM FOR PROCESSING A/R AND COLLECTIONS A PC-BASED ENVIRONMENT, REPLACING MANUAL PROCEDURES. BECAUSE THE COMPANY HAS SUBSTANTIAL SHORT-TERM BORROWINGS TO MAINTAIN LIQUIDITY, ITS LENDERS REQUIRE AUDIT FINANCIAL STATEMENTS. THE MAJOR AUDIT CONCERN HERE IS THAT RECORDED SALES HAVE OCCURRED AND ARE CORRECTLY VALUED. THE FLOWCHARTIN THEFOLDER, SALES-ACCOUNTS RECEIVABLE-->MANUAL SYSTEM--->Automation of Daily Procedures, Including Collections IS RELEVANT TO THIS CASE. THERE HAS BEEN NO TURNOVER IN THE ACCOUNTING DEPARTMENT, AND ALL PERSONNEL ARE REGARDED AS COMPETENT AND KNOWLEDGABLE. THERE WERE 44,405 SALES INVOICES FOR THE YEAR. TOTAL RECORDED SALES IS $91,792,361.02 THERE ARE 6,643 OPEN INVOICES AT END OF YEAR. TOTAL AMOUNT OF OPEN INVOICES IS $14,562,788.40 THERE WERE 37,304 CUSTOMER PAYMENTS POSTED.DURING THE YEAR TOTAL AMOUNT OF PAYMENTS RECEIVED IS$84,782,235.77 THE COMPANY HAS BEEN EXPERIENCING STEADY GROWTH IN REVENUES AS THE ECONOMY HAS RECOVERED. SCROLL DOWN THE ENGAGEMENT PARTNER HAS DECIDED THAT: CLIENT RISKINESS IS MODERATE. DESIGN EFFECTIVENESS OF CONTROLS OVER THE RELEVANT PROCEDURES DESCRIBED IN THE FLOWCHART IS EXCELLENT BECAUSE THIS IS A TEST OF A SYSTEM THAT HAS BEEN CHANGED, PLANNING IS TO BE BASED ON AN EXPECTED DEVIATION RATE OF 2%. THE AUTOMATED PROCEDURES ARE NEWLY INSTALLED AND APPEAR TO BE WELL-DESINGED. THE AUDITOR DOES NOT EXPECTED TO ENCOUNTER DEVIATONS. YOUR FIRM'S POLICIES THE FOLLOWING SUMMARIZES YOUR FIRM'S POLICIES REGARDING AUDIT PROCEDURES: MAXIMUM TOLERABLE DEVIATION RATE SCROLL DOWN POPULATION CORPORATE GOVERNANCE BOOK VALUE PRIVATE PUBLIC <=1,000,000 10% 8% >1,000,000 AND <=10,000,000 6% 4% >10,000,000 4% 2% THE FIRM USES THE AUDIT RISK MODEL TO PLAN AUDIT PROCEDURES. FOR THIS COMPREHENSIVE PROBLEM ASSUME THAT ALL DATA ARE ANNUAL, THROUGH YEAR-END, AND THAT ALL THE FOLLOWING RISK PLANNING TABLE APPLIES TO BOTH PUBLIC AND PRIVATE COMPANIES: CLIENT RISKINESS PLANNED AUDIT RISK [AR] LOW 10% MODERATE 5% HIGH 1% YOUR FIRM'S POLICY IS TO DETERMINE THE PRELIMINARY RISK OF MATERIAL MISSTATEMENT, RMMp , AS FOLLOWS: DESIGN EFFECTIVENESS PLANNED RISK OF MATERIAL MISSTATEMENT EXCELLENT LESSER OF 5% OR 2*AR MODERATE LESSER OF 10% OR 2*AR SCROLL DOWN WEAK 20% INEFFECTIVE OR NON-EXISTENT 100% YOUR FIRM APPLIES THE AUDIT RISK MODEL AS FOLLOWS: AR = RMM * DR IF DR CALCULATED IN THE AUDIT RISK MODEL IS >25%, THEN USE 25%. REQUIRED ANSWER EACH PART OF THIS PROBLEM ON THE ACCOMPANYING WORKSHEETS. YOUR WORK MUST BE CONSISTENT, FROM THE FACTS STATED ABOVE TO THE RESULTING CALCULATION OF DR. YOUR WORK MUST ALSO BE CLEARLY DOCUMENTED IN THE AREAS PROVIDED IN THE SPREADSHEETS. ALL CALCULATIONS MUST BE SHOWN. IF, HOWEVER, YOU USETHE UPLOADED EXCEL WORKBOOKS TO PERFORM CALCULATIONS, PROVIDE SCREENSHOTS OF YOUR RESULTS. SEE BELOW FOR INSTRUCTIONS ON HOW TO PASTE SCREENSHOTS INTO A SPREADSHEET. THE EXTERNAL SOFTWARE HAS BEEN UPLOADED TO BLACKBOARD AND IS IN THE ATTRIBUTES SAMPLING FOLDER.IDENTIFY THE SOFTWARE [AN EXCEL WORKBOOK], TAKE A SCREEN SHOT OF YOUR RESULTS AND PASTE IT INTO THE WORKSHEET FOR THAT PART ON WHICH YOU ARE WORKING. TO CAPTURE A SCREEN SHOT, PRESS ALT and PRINT SCREEN KEYS SIMULTANEOUSLY THEN, OPEN THE WORKSHEET IN WHICH YOU WANT TO PASTE THE SCREEN SHOT. CLICK ON THE CELL THAT WILL BE THE UPPER LEFT CORNER OF THE PASTED SCREEN SHOT. POSSIBLY THE BEST WAY TOPASTE ESSENTIAL OUTPUT IS TO: AND 2.USE THE 'PASTE AS PICTURE' OPTIONIN THE PASTE SPECIAL DROP-DOWN MENU UNDER THE HOME TAB.

RANDOM START NUMBERS 62848274

A. IDENTIFY THE POPULATION TO BE TESTED

B. WHAT IS THE FRAME?

C. WHAT IS THE SAMPLING UNIT?

D. IDENTIFY THE DOCUMENT(S) THAT YOU WILL BE EXAMINING