The Tomlin Company's principal activity is buying milk from dairy farmers, processing the milk and delivering the milk to retail customers. You are engaged in auditing the sales transactions of the company and determine the following:

SAMPLING FOR ATTRIBUTES 1. The company has 50 retail routes; each route consists of 100 to 200 accounts, the number that can be serviced by a driver in a day.
2. The driver enters cash collections from the day's deliveries to each customer directly on a statement form in record books maintained for each route. Mail remittances are posted in the route record books by office personnel. At the end of the month the statements are priced, extended and footed. Photocopies of the statements are prepared and left in the customers' milk boxes with the next milk delivery.
3. The statements are reviewed by the office manager, who prepares a monthly list for each route of accounts with 90-day balances or older. The list is used for intensive collection action.
4. The audit program used in prior audits for the selection of sales transactions for compliance tests stated: "Select two accounts from each route, one to be chosen by opening the route book at random and the other as the third account on each list of 90 -day or older accounts. For each account selected, choose the latest transaction for testing."
Your review of sales transactions leads you to conclude that statistical sampling techniques may be applied to their examination.
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a. Since statistical sampling techniques do not relieve the CPA of his responsibilities in the exercise of his professional judgment, of what benefit are they to the CPA? Discuss.

b. Give the reasons why the audit procedure previously used for selection of sales transactions (as given in 4 above) would not produce a valid statistical sample.

c. Suggest two ways to select a valid statistical sample.

d. Assume that the Company has 10,000 sales transactions and that your statistical sampling disclosed 6 errors in a sample of 200 transactions. Is it reasonable to assume that 300 transactions in the entire population are in error? Explain.