In this mini-case you will statistically evaluate the tests of controls on accounts payable for the 2019 audit of EarthWear Clothiers, Inc.

INSTRUCTIONS:

Please download the file below to complete the audit tasks associated with this mini-case. The Excel workbook contains the instructions and workpapers you are to complete.

11e_Ch8_Mini_case_Testing_PartB

Input your responses from Work Paper 8-1 into the corresponding questions in Connect.

Compute Sample Size

The list below indicates the control activities tested using voucher packets in Part A (Part A was a Chapter 6 assignment, but you can complete this assignment even if you did not complete Part A). Use the information provided below to calculate the sample size using IDEA. Please refer to Chapter 8 of the textbook for instructions on how to use IDEA to calculate sample sizes. When different sample sizes are computed for control activities that will be tested concurrently, it is common to use the largest sample size computed for testing all control activities (See Chapter 8 for a more detailed description.)

Compute Upper Deviation Rate

The list below indicates the test of controls results for each control activity. Use the information provided to evaluate the results using IDEA. Please refer to Chapter 8 for instructions on using IDEA to evaluate test results and to compute the upper deviation rate. After you compute the upper deviation rate, determine whether the test results met the objectives and can be accepted (i.e., determine whether the computed upper deviation rate is below the tolerable deviation rate noted above for the control activity). Select "Accept" or "Reject" from the drop down menu in each cell of the Accept/Reject column. (Round your deviation rate answers to 2 decimal places. Omit the "%" sign in your response.)

Work Paper 8-1 Desired Confidence Level Tolerable Deviation Rate (%) Expected Population Deviation Rate (%) Population Sample Size 90% 2,147 5% 1% a 100 90% 2,147 10% Description of Control Activities 1 Document packet includes all documents appropriate for the transaction. The Purchase Requisition is signed by 2 supervisor. 3 The Purchase order is signed by an authorized purchasing agent. 4 Quantities on vendor's invoice agree with related receiving report and purchase order, and invoice is mathematically correct. 5 All documents in voucher packet have been stamped "paid". 4% 90% 2,147 10% 1% 90% 2,147 5% 1% 90% 2,147 10% 1% Sample Size Used Desired Confidence Level Computed Upper Deviation Rate (%) Number of Deviations Sample Size Accept/ Rej % 90% 90% 0 2 % Description of Control Activities 1 Document packet includes all documents appropriate for the transaction. 2 The Purchase Requisition is signed by a supervisor. 3 The Purchase Order is signed by authorized purchasing agent. 4 Quantities on vendor's invoice agree with related receiving report and purchase order, and invoice is mathematically correct. 5 All documents in voucher packet have been stamped "paid". Accept Accept Accept 90% 1 % 1 % 90% 90% Accept Accept