Oryx Limited - 10 marks

As part of your audit of Oryx Limited, a company that sells industrial supplies, your firm Left and Right CPA has conducted computer-assisted audit tests using ACL (Audit Command Language) on the accounts receivables transaction file. Left and Right CPAs audited the sales and accounts receivable accounts of Oryx on a sample basis.

Accounts Receivable:

There were 2,000 customer accounts in the subsidiary ledger with a total recorded value of $375,000 for the year ended 31 December 2015. As part of the audit program, Left and Right selected a sample of 100 customer accounts having a recorded value of $20,000. They performed the audit procedures and determined that the audited amount of the customer accounts that was sampled totaled to $19,000. Tolerable misstatement was set at $25,000.

Sales Transactions:

Additionally, the auditors used ACL to generate the following report that extracted all sales transactions greater than $5,000:

EXTRACT RECORD IF Amount >= 5,000.00

Input: Records: 339 Output: Records: 17

Invoice Number	Invoice Date	Product Number	Product Class	Quantity	Invoice Amount
12858	01/06/2015	060112296	06	977	10.942.40
12874	01/25/2015	090081001	09	38	5,970.40
12899	02/16/2015	090585322	09	95	13,091.00
12913	03/01/2015	090669611	09	776	6,984.00
12917	03/05/2015	080935428	08	174	7.697.76
13002	06/06/2015	010226620	01	501	5,410.80
13013	06/18/2015	010102840	01	135	5,319.00
13033	07/09/2015	052208805	05	977	5,979.24
13042	07/17/2015	080935428	08	182	8,051.68
13065	08/18/2015	090507811	09	871	7,037.68
13087	09/08/2015	090585322	09	275	37,895.00
13089	09/09/2015	052720615	05	245	10,045.00
13107	09/30/2015	090585322	09	56	7,716.80
13152	11/16/2015	052720615	05	141	5,781.00
13163	12/01/2015	024133112	02	513	5,437.80
13170	12/04/2015	024133112	02	794	8,416.40
13183	12/13/2015	010155170	01	724	5,104.20
				7,474	156,880.16

Required:

Use the Case Facts above to outline the answers for the following. Any answer with no application to the case will be awarded zero marks

A) Calculate the projected misstatement based on the results of the representative sample from the population of accounts receivables. Evaluate the results to determine if there could be a material misstatement of accounts receivables. (2 Marks)

B) Name and describe the type of sample generated from the ACL extract report above relating to the sales transactions. Describe three advantages or disadvantages of this type of a sample. (4 marks)

C) Assume that the last four invoices of the ACL report had not been paid by the customers so they are included in the accounts receivable balance as of December 31, 2015.

Provide two SPECIFIC balance-related audit objectives that you could use to test these unpaid accounts receivable invoices. For each specific balance-related audit objective that you describe, state the risk of material misstatement (RMM) to Oryx. (4 marks)

Specific balance-related audit objective (1 mark)

Risk of Material Misstatement (ROMM) (1 mark