This is your first year in charge of the audit of the All-America Bank. All- America is a publicly held bank in excellent condition; it has been a client of the firm for several years. Two years ago, the bank installed a highly computerized system for processing transactions. The system and all related controls have been tested and relied upon in the audit each year. Prior years’ audit tests of both transactions and balances revealed no monetary errors in the processing of transactions.

You are currently planning the approach and scope of the audit. You will use statistical sampling for tests of the proof and transit function controls relating to demand deposits and for tests of details of demand deposits as of an interim audit date. You expect demand deposits to be 40,000 accounts totaling \($100,000,000.\) Earnings before taxes for the year are expected to be about \($500,000\).

Required :

Develop a plan for applying statistical sampling to tests of controls and confirmation of demand deposits. Be as specific as possible for all steps and judgments. Make any assumptions necessary.