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.

Required:
What conclusion should Austen reach about each control procedure? Justify your answer.

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Control Procedure Parameters Deired confidence Tolerable deviation rate Expected population deviation rate 95% 7% 2% 90% 996 2.5%