CalgarfClothing Company manufactures high- quality silk ties that are mar-keted under a number of trademarked names. Joe & Vandervelte LLP has been the company’s auditors for five years. Lisa Austen, the senior-in-charge of the audit, has reviewed Calgari’s controls over purchasing and inventory, and she determined that a number of controls can be relied upon to reduce control risk. Austen has decided to test two control procedures over purchases and inventory: (1) purchase orders are agreed to receiving reports and vendor’s invoices for product, quantity, and price; and (2) inventory is transferred to raw material stores using an approved, pre-numbered receiving report.
Austen decided to use a non-statistical sampling approach based on the following judgments for each control procedure and has judgmentally decided to use a sample size of 75 purchase orders for control 1 and 30 receiving reports for control 2.

After completing the examination of the sample items, Austen noted one deviation for each control procedure.

What conclusion should Austen reach about each control procedure? Justify youranswer.

  • CreatedSeptember 22, 2014
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