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Control Deviations/Attribute Sampling Problem Scenario: For the audit ofthe financial statements of Mercury @Company, Stella Mason, CPA, has decided to use sampling m the tests of controls for sales transactions. Based on her knowledge of Mercury's operations in the area of sales, she decides that the EPDR is likely to be 3% and that she is willing to accept a 5% risk that the true population deviation rate is not greater than 6%. Given this information, Mason selects a random sample of 150 sales invoices from the 5,000 generated during the year and examines them for deviations. Invoice No. 6791 6810 7364 7625 8431 8528 8566 8780 9169 9974 She notes the following deviations in her audit schedules. There is no other documentation. C omment Sales invoice was originally footed incorrectly but was corrected by client before the bill was sent out. Voided sales invoice examined by audltor. Shipping document for a sale of merchandise could not be located. Sales invoice for S2,87j has not been collected and is 6 months past due. Client unable to locate the duplicate sales Invoice. Invoice was dated 3 days later than the date entered in the sales journal. Customer order IS not attached to the duplicate sales invoice Billing is for S 100 less than It should be due to an unmtentional pricmg error _ No indication of internal verification is included on the invoice. Client unable to locate the duplicate sales Invoice. Credlt not but the sale was for only $7 _ 65 _ Lack of indication of internal verification of price extensions and postings of sales invoice Steps to Complete 1 Evaluate each sample item (record your responses in Table 1)- a) Is the item a deviation? b) For each deviation: state the attribute that was tested. 2. Evaluate each attribute that you tested (record your responses in Table 1 : columns 1-3): a) For each attribute in the population that is tested, calculate SDR assuming a 500 ARO for each attribute. Note that a single attribute may have more than one deviation. 3 Assume you have used statistical sampling. Evaluate your sample results (record your responses in Table 2: columns 4-5): a) For each attribute in the population that is tested, use the Attributes Sampling Evaluation Table to determine the estimated population performance. b) Make a conclusion about each attribute, using proper terminology and specifying your level of confidence in your judgment. 4. Assume you have used non-statistical evaluation (record your responses in Table 2, column 6) a) Calculate TDR - SDR for each attribute and evaluate whether this cushion for the (unknow.n) amount of sampling risk is sufficiently large Elven the 5% ARO Assume TDR Is 6% for each attribute. b) Make a conclusion about each attribute, using properterminology (record your judgment below). _ Explain why it is inappropriate to set a smgle acceptable TDR and EPDR for the combined exceptions (record your answer below).