Fred Saros is auditing cash payments for OGA, a large supermarket. OGA deals with several very large corporate suppliers who expect payment by electronic funds transfer within three business days of delivery. Other large suppliers will accept cheques or electronic funds transfer on terms of 14 days, and small suppliers receive cheques with payment terms of 30 days. Other regular, large cash payments include wages (paid weekly by electronic funds transfer from a wages imprested account), utilities (electricity accounts are paid monthly by cheque), cleaning (paid monthly by cheque), and rent (paid monthly by electronic funds transfer). In addition, there are irregular payments for items such as maintenance, fixtures purchase and lease, and vehicle running costs.
All cash payments are processed in the central office after the required set of documents has been assembled and checked by two junior accounts staff. Payments are authorized by a senior accountant, and electronic funds transfer authorities and cheques are countersigned by the chief accountant (except if he is on leave when another member of the accounting staff performs this task). Journals and ledgers are maintained by staff not involved in cash payment processing.
Fred needs to test controls over cash payments and has planned to make extensive use of sampling.
Required
(a) What population(s) would be relevant to Fred's control testing?
(b) Explain the potential implications of sampling risk for the audit of cash payments.
(c) What possible non-sampling risks exist in this case?