For the examination of the financial statements of Scotia Inc., Rosa Schellenberg, a public accountant, has decided to apply non statistical audit sampling in the tests of sales transactions. Based on her knowledge of Scotia’s operations in the area of sales, she decides that the estimated population deviation rate is likely to be three percent and that she is willing to accept a 5-percent risk that the true population exception rate is not greater than 6 percent. Given this information, Rosa selects a random sample of 150 sales invoices from the 5,000 prepared during the year and examines them for exceptions. She notes the following exceptions in her working papers.

REQUIRED

a. Which of the invoices in the table should be defined as an exception?

b. Explain why it is inappropriate to set a single acceptable TER and EPER for the combined exceptions.

c. State the appropriate analysis of exceptions for each of the exceptions in the sample.

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Invoice No. Comment 5028 Sales Invoice had Incorrect price, but a subsequent credit note was sent out as a correction. Voided sales invoiee examined by auditor. 6791 Shipping document for a sale of merchandise could not be 6810 located. 7364 Sales invoice for $2,875 has not been collected and is six months past due. Client unable to locate the printed duplicate copy of the sales 7625 invoice. 8431 Invoice was dated three days later than the date of the shipping document. 8528 Customer purchase order is not attached to the duplicate sales invoice. Billing is for $100 less than it should be due to a pricing error. 8566 8780 Client is unable to locate the printed duplicate copy of the sales invoice. 9169 Credit is not authorized, but the sale was for only $7.65.