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Client: Pinnacle Manufacturing
Audit Area: Tests of Controls and Substantive Test of Transactions--Acquisitions.
Define the Objective(s): Examine vendors' invoices, receiving reports, purchase orders, and other related documents
to determine whether the system has functioned as intended and as described in the audit program.
Define the population precisely (including stratification, if any): Vouchers from 1/1/2016 to 10/31/2016.
First voucher number - 6734. Last voucher number - 33722.
Define the sampling unit, organization of population items, and random selection procedures:
Voucher number, recorded sequentially in the acquisitions journal; random number function in electronic spreadsheet.
EPER TER ARO
Initial
sample
Size
Sample Size
Number of
Exceptions
SER
Calculated
Sampling Error
(TER-SER)
1.
Evidence of internal
verification of voucher
package including propriety
of purchase, dates, unit
costs, prices, extensions,
footings, account
classification, recording in
journal, and posting and
summarization. (6a, b)
06% 10% 30 30 2 6.7% -0.7%
2.
Prices on vendors' invoices
conform to approved price
limits established by
management. (6c)
05% 10% 40 40 0 0.0% 5.0%
3.
Price times quantity and
other calculations on the
vendor's invoice are correct.
(6d)
1% 5% 10% 50 50 0 0.0% 5.0%
4.
Evidence of proper account
classification on vendors'
invoices. (6e)
2% 5% 10% 70 70 0 0.0% 5.0%
5.
Dates on entries in
purchases journal agree with
dates on receiving reports.
(6f)
1% 5% 10% 50 50 2 4.0% 1.0%
6.
Evidence of internal
verification of each purchase
voucher. (6g)
06% 10% 30 30 0 0.0% 6.0%
Results: based on the results of the tests, all controls appear effective except for evidence of internal verification. Since there were also
two errors on timing and and error in comparing the vendor's invoice amount to the acquisitions journal that is not included as an attribute,
a larger than normal sample in year-end testing of accounts payable is appropriate.
Notes: 1. The planned audit variables are judmental. The results of the prior year from part III were used to decide EPER. Initial sample size and CUER are judgments.
2. There was an error discovered where there was no attribute. This happens in practice too. The auditor should not ignore the exception even though it is an unplanned discovery.
Planned Audit
Description of Attributes
Actual Results
Client: Pinnacle Manufacturing
Audit Area: Tests of Controls and Substantive Test of Transactions--Cash Disbursements
Define the Objective(s): Examine cancelled checks and other related documents
to determine whether the system has functioned as intended and as described in the audit program.
Define the population precisely (including stratification, if any): Cancelled checks from 1/1/2016 to 10/31/2016.
First check number - 12376. Last check number - 37318.
Define the sampling unit, organization of population items, and random selection procedures:
Check number, recorded sequentially in the cash disbursements journal; random number function in electronic spreadsheet.
EPER TER ARO
Initial
sample
Size
Sample Size
Number of
Exceptions
SER
Calculated
Sampling Error
(TER-SER)
1.
Payee, name, amount, and
date on cancelled check
agrees with related
purchases journal and
cash disbursements entry.
(9a)
05% 10% 40
2.
Evidence of signature,
proper endorsement and
cancellation of each check.
(9b)
05% 10% 40
3.
Date on cancelled check
agrees with bank
cancellation date. (9c)
25% 10% 70
4.
Cash discounts are
correct. (9d)
05% 10% 40
Description of Attributes
Planned Audit
Actual Results
Selection of 50 random numbers (largest sample size is 50)
10237 Note: Random numbers in this file change each time the file
11302 is opened. To show numbers in sorted order, students will
11741 need to use the block/values command to set the random number
19804
values after the 50 items are generated with the RANDBETWEEN
23183 command. Next, students should sort the random numbers in
26914 ascending order into a separate column.
27907
14586
27508
22393
20980
20273
8811
15270
27518
32858
18899
30809
14103
21676
28123
18740
30007
23298
9598
9827
20287
14527
28619
28116
22841
31801
20845
8335
24247
17726
11073
21915
16399
24133
12986
31036
9622
28867
29907
14005
19323
11881
29940
9821
