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.

Control Results 1. All sales over $10,000 must be approved by the sales manager by initialing the 1. There were only 25 sales over $10,000 in the sample. So, the auditbr randomly collects an additional 75 sales transactions that were over $10,000. All were approved by the sales manager customer's order 2. Credit must be approved by 2. Three sales were recorded without the credit department prior to shipment and noted on the customer's order evidence of credit approval. The sales manager said she had approved the sales. No customer order could be found for two of the other sampled 3. Sales are recorded only 3. No shipping document could be found when a shipping document is forwarded to the billing department. for three of the sampled items. 4. The date ofr the sale 4. Four sales were recorded prior to the must correspond to the date on the shipping document. date of shipment. Your follow-up indicates that a temporary worked for the last two months of the fiscal year and was unaware of this 5. All prices are obtained from the current price list that is periodically updated by the 5. All prices agreed with the appropriate sales manager 6. The shipping department is 6. No customer order could be found not to ship products wihout for two sample items as indicated in first receiving an approved step (2]. customer's order 7. The biling department 7. Four billed quantities were for more compares the quantity billed with the customer's order than the customer order. Three of these took place near year end. In addition, there was no customer order for the two items indicated in step (2)