Porter Gale Corporation is a publicly-traded company. You are completing an audit at their headquarters and will conduct a test of controls over revenue recognition using attributes sampling. You will use the results as part of the evidence on which to base your opinion on internal controls and to determine what substantive auditing procedures you should perform on revenue and accounts receivable. Your test of controls involves the following:

• Set the risk of overreliance at 5%
• Tolerable deviation rate at 5%
• Expected deviation rate at 1%

You plan to use a sample size of 100. (Note that this sample size is just rounded up from the sample size of 93 that would have been obtained from the appropriate table). The results of your testing are as shown:

Control	Results
1. All sales over $10,000 must be approved by the sales manager by initialing the customers order.	1. There were only twenty-five sales over $10,000 in the sample. So, the auditor randomly collects an additional seventy-five sales transactions that were over $10,000. All were approved by the sales manager.
2. Credit must be approved by the credit department prior to shipment and noted on the customers order.	2. Three sales were recorded without evidence of credit approval. The sales manager said she had approved the sales. No customer orders could be found for three of the other sampled items.
3. Sales are recorded only when a shipping document is forwarded to the billing department.	3. No shipping document could be found for four of the sampled items.
4. The date of recording the sale must correspond to the date on the shipping document.	4. Five sales were recorded prior to the date of shipment. Your follow-up indicates that a temporary employee worked for the last two months of the fiscal year and was unaware of this requirement.
5. All prices are obtained from the current price list that is periodically updated by the sales manager.	5. All prices agreed with the appropriate price list.
6. The shipping department is not to ship products without first receiving an approved customers order.	6. No customer orders could be found for two sample items as indicated in Step 2
7. The billing department compares the quantity billed with the customers order.	7. Five billed quantities were for more than the customer order. Four of these took place near year-end. In addition, there was no customer order for the three items indicated in Step 2.

Required: Create a table (in Excel, in a format like the table shown in your assignment) with an analysis of your audit and include a response for each question below. Column labels are included below:

1. Control (given in the problem)
2. Results (given in the problem)
3. Upper Limit Deviation: Determine the upper limit of deviation for each of the controls.
4. Impact of Results: What impact do these results have on the type of opinion that you will give on the clients internal controls?
5. Potential misstatements: Indicate the potential misstatements that could result from the control deviations.
6. Substantive Audit Procedures: Determine what substantive audit procedures should be performed in response to each of the identified control deviations.
7. Final Assessment: Do you feel confident that the sample you selected provides a good assessment of internal controls? Why or why not?