Jenny Jacobs, CPA, is planning to use attribute sampling in order to determine t
ID: 2443833 • Letter: J
Question
Jenny Jacobs, CPA, is planning to use attribute sampling in order to determine the degree of reliance to be placed on an audit client's system of internal control over sales. Jacobs has begun to develop an outline of the main steps in the sampling plan as follows:
1. State the test objectives (for example, to test the reliability of internal controls over sales).
2. Define the population (the period covered by the test, the sampling unit, the completeness of the population).
3. Define the sampling unit (for example, client copies of sales invoices).
Required:
a. What are the remaining steps in the outline that Jacobs should include in the statistical test of the sales invoices?
b. What are the advantages of using statistical audit sampling?
(AICPA, adapted)
Explanation / Answer
a. The following steps should include in the statistical test of the sales invoices: The auditor looks for an indications on duplicate sales invoices to see whether the invoices are genuine or not. 1. Sales invoices represent existing sales. 2. All sales have been recorded. 3. All sales invoices have been correctly posted to customer accounts. 4. Debit entries in the accounts receivable master file are correctly supported by sales invoices. To verify that all sales transactions have been recorded , a substantive test of transactions should be completed on a representative sample drawn from 1. Entries in the sales journal 2. The billing clerk's file of sales orders. 3. File of duplicate copies of sales invoices for which all pre-numbered forms in the series have been accounted the shipping clerk's file of duplicate copies of bills of lading. b). The advantages of using statistical audit sampling: Sampling is the application of an audit procedure. It helps auditor to judge the transactions. The auditors used many ways of samplings: 1. Design and efficient sample 2. Measure the sufficiency of evidence obtained 3.Quantify sampling risk Audit sampling uses: 1.Audit sampling 2.Audit sampling requires Auditor's judgement. 3.Auditor's GuideRelated Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.