Golem Supply Company (Golem) is a medium-sized distributor of camping supplies to Central and Western Canada. You have worked as an internal auditor with the company for many years and know that Golem management has instituted excellent internal controls for sales (due in part to the work you have performed in the past).

In providing control over shipments, the client has pre-numbered 'warehouse removal slips' that are used for every sale. It is a company policy never to remove goods from the warehouse without an authorized removal slip. After shipment, two copies of the warehouse removal slip are sent to billing for the computerized preparation of a sales invoice. One copy is stapled to the duplicate copy of a pre-numbered sales invoice, and the other copy is filed numerically. In some cases, more than one warehouse removal slip is used for billing one sales invoice. The smallest warehouse removal slip number for the year is Invoice Number:15 000 and the largest is Invoice Number: 37 000. The smallest sales invoice number is 4750 and the largest is 27250.

In the audit of sales, one of the major concerns is the effectiveness of the controls in ensuring that all shipments are billed. You have decided to use statistical sampling in testing internal controls.

 

Required:

A)  Define the term population and describe the population that you would use for conducting a statistical sample of completeness of sales based on the facts presented above

B) What would you define as an example of a deviation (or error) when testing completeness of sales in the example above? Why?

C) What are two advantages and two disadvantages of using statistical sampling?

D) Define non-sampling risk in the context of Golem Supply Company

E) Define sampling risk in the context of Golem Supply Company