The Burke CPA firm is auditing Cabrera, Inc. The company is a manufacturer. It manufactures rubber ducks and ships them to retailers e.g. Toys R Us. There should be a shipping document to go with every sales invoice. The firm tentatively plans to rely on this internal control procedure. To test this internal control procedure, Burke decides to use attribute sampling. The firm decides, based on last year’s audit, on a 90% confidence level. The firm expects that 2% of the time, this internal control procedure does not operate effectively. The firm sets a tolerable deviation rate of 7%. What is the required sample size?

The Burke CPA firm is auditing Cabrera, Inc. The company is a manufacturer. It manufactures rubber ducks and ships them to retailers e.g. Toys R Us. There should be a shipping document to go with every sales invoice. The firm tentatively plans to rely on this internal control procedure. To test this internal control procedure, Burke decides to use attribute sampling. The firm decides, based on last year’s audit, on a 90% confidence level. The firm expects that 2% of the time, this internal control procedure does not operate effectively. The firm sets a tolerable deviation rate of 7%. What is the required sample size?

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 15RQSC

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General Attributes Sampling. Frazier Holyfield, a new staff accountant, is evaluatingimportant controls over the revenue cycle and, more specifically, assessing the operatingeffectiveness of the control that all shipments made to customers by Top Rank Inc. havebeen properly invoiced.Required:Comment on the following actions that Holyfield performed. You should evaluate eachaction independently of any other actions.a. Holyfield decided to inspect documentary evidence that all shipments made by Top Rankhave been invoiced by matching shipping documents with invoices. Accordingly, shehas identified the population from which she intends to sample as all sales invoices. TopRank has a computerized list of invoiced sales that she can use to select the appropriatesample.b. Because Holyfield plans to place a high degree of reliance on this particular control, sheassesses the risk of overreliance at 5 percent. In previous years, a 10 percent level wasused, but consultation with the engagement…