The results of substantive testing of sales invoices at City Electronics are shown in table 6.8. The

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The results of substantive testing of sales invoices at City Electronics are shown in table 6.8. The three strata correspond to different departments and the overall tolerable error is set at $40,000. 

SAMPLE TOTAL VALUE STRATUM TOTAL VALUE PROJECTED ERROR ERROR FOUND $ 7,930 STRATUM $101,170 $128,660 $ 76,830 $ 3,290 $


Required

(a) Project the errors for each stratum and calculate the total projected error. Is the projected error material? What difference would it make if the tolerable error was set at $30,000? Explain. 

(b) Discuss the implications for the substantive testing if it was discovered that the permanent staff member in the department corresponding to stratum 3 was on long-term leave for three months of the fiscal year.

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Auditing A Practical Approach

ISBN: 978-1118849415

2nd Canadian edition

Authors: Fiona Campbell, Robyn Moroney, Jane Hamilton, Valerie Warren

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