Assume that you are using attribute sampling to test the controls over revenue recognition of the Packet Corporation, a public company, and will use the results as part of the evidence on which to base your opinion on its internal controls and to determine what additional auditing procedures should be performed on revenue and accounts receivable. You have decided to test the following controls and have set the risk of overreliance at 5%, the tolerable deviation rate at 5%, and the expected deviation rate at 1%. A sample size of 100 is used. (Note that this sample size is just rounded up from the sample size of 93 that would have been obtained from the appropriate table.) The results of your testing are as indicated below.

a. Determine the upper limit of deviation for each of the controls.
b. What impact do these results have on the type of opinion to be given on the client’s internal controls?
c. Indicate the potential misstatements that could be the result of control deviations.
d. Determine what substantive audit procedures should be performed in response to each of the control deviations identifiedearlier.

  • CreatedSeptember 22, 2014
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