Sample Selection. Hunter McNeal is studying and evaluating Branyon’s internal controlsrelated to the mathematical verification of sales invoices. In this verification, Branyon’s control activities require that employees perform the following procedures:∙ Verify that sales invoices are prepared only for items actually shipped to customers. Thisactivity is evidenced by requiring employees to place a checkmark next to quantities onthe sales invoices.∙ Verify that prices charged to customers are from approved price lists. This activityis evidenced by requiring employees to place a checkmark next to prices on the salesinvoice.∙ Verify that extensions and footings on invoices are mathematically accurate. This activityis evidenced by requiring employees to initial the bottom of the invoice in a sectionmarked “Mathematically verified by.”To verify the operating effectiveness of these activities, McNeal established an expectedpopulation deviation rate of 3 percent, a tolerable rate of deviation of 6 percent, and a risk ofoverreliance of 10 percent. Using these parameters, McNeal determined a necessary samplesize of 132 invoices, is now ready to select invoices for examination, and is considering theuse of systematic selection.Required:a. McNeal wants to ensure the selection of a representative sample of sales invoices. Whatare some of the characteristics that should be considered to ensure that the sample is representative of the population of sales invoices?b. What issues does the use of systematic selection introduce with respect to McNeal’s ability to select a representative sample of sales invoices from the population?c. Identify any issues associated with the use of systematic selection in the following independent circumstances.1. Branyon does not maintain invoices in a computerized format but maintains hardcopy by date. McNeal has full access to the files containing the invoices.2. Branyon does not maintain invoices in a computerized format but maintains hardcopy according to customer classification (“A” represents high-volume customers;“B,” middle-volume customers; and “C,” low-volume customers). McNeal has fullaccess to the files containing the invoices. 3. Branyon does not maintain invoices in a computerized format but maintains hardcopy by date. Because they are maintained off-site, McNeal does not have full accessto the files; however, Branyon has offered to pull invoices selected by McNeal andmake them available for the tests of controls.4. Branyon maintains invoices in a computerized format arranged alphabetically by customer name. This file can be sorted by date, amount of sale, customer number, customer classification, and zip code. McNeal has full access to the computerized files.
Sample Selection. Hunter McNeal is studying and evaluating Branyon’s internal controls
related to the mathematical verification of sales invoices. In this verification, Branyon’s control activities require that employees perform the following procedures:
∙ Verify that sales invoices are prepared only for items actually shipped to customers. This
activity is evidenced by requiring employees to place a checkmark next to quantities on
the sales invoices.
∙ Verify that prices charged to customers are from approved price lists. This activity
is evidenced by requiring employees to place a checkmark next to prices on the sales
invoice.
∙ Verify that extensions and footings on invoices are mathematically accurate. This activity
is evidenced by requiring employees to initial the bottom of the invoice in a section
marked “Mathematically verified by.”
To verify the operating effectiveness of these activities, McNeal established an expected
population deviation rate of 3 percent, a tolerable rate of deviation of 6 percent, and a risk of
overreliance of 10 percent. Using these parameters, McNeal determined a necessary sample
size of 132 invoices, is now ready to select invoices for examination, and is considering the
use of systematic selection.
Required:
a. McNeal wants to ensure the selection of a representative sample of sales invoices. What
are some of the characteristics that should be considered to ensure that the sample is representative of the population of sales invoices?
b. What issues does the use of systematic selection introduce with respect to McNeal’s ability to select a representative sample of sales invoices from the population?
c. Identify any issues associated with the use of systematic selection in the following independent circumstances.
1. Branyon does not maintain invoices in a computerized format but maintains hard
copy by date. McNeal has full access to the files containing the invoices.
2. Branyon does not maintain invoices in a computerized format but maintains hard
copy according to customer classification (“A” represents high-volume customers;
“B,” middle-volume customers; and “C,” low-volume customers). McNeal has full
access to the files containing the invoices.
3. Branyon does not maintain invoices in a computerized format but maintains hard
copy by date. Because they are maintained off-site, McNeal does not have full access
to the files; however, Branyon has offered to pull invoices selected by McNeal and
make them available for the tests of controls.
4. Branyon maintains invoices in a computerized format arranged alphabetically by customer name. This file can be sorted by date, amount of sale, customer number, customer classification, and zip code. McNeal has full access to the computerized files.
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