Doug Iceberge, senior-in-charge of the audit of Fisher Industries, has decided t

Question

Doug Iceberge, senior-in-charge of the audit of Fisher Industries, has decided to test the following two controls for Fisher's revenue process. 1. All sales invoices are supported by proper documentation, that is, a sales order and a shipping document. 2. All sales invoices are mathematically correct. Iceberge has decided to use a non statistical sampling approach based on the following judgments for each control and has judgmentally decided to use a sample size of 50 sales invoice packets.

After completing the examination of the 50 sample items, Iceberge noted one deviation for control 1 and two deviations for control 2.

What should Iceberge conclude about each control? Justify your answer.

Parameters 1 2 Desired confidence level 95% 90% Risk of assessing control risk too low 5% 10% Tolerable deviation rate 6% 8% Expected popluation deviation rate 3% 3%

Explanation / Answer

PARAMETER 1 HAS HEIGHER CONFIDENCE LEVEL THAN THE PARAMETER 2

AND ALSO HAVE THE LOW RISK SO MORE OR LESS PARAMETER 1 WILL BE MORE HELPFUL IN THIS

ON THE OTHERHAND

THE PARAMETER 2 IS HAVING HIGHER TOKERABLE DEVIATION RATE WHICH MAKES IT MORE INFLUENTIAL AND ACUSTOMED TO THE RESULT.

OVERALL THE PARAMETER 1 WILL BE MORE CONLUSIVE AND RESULT ORIENTED

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