For the audit of Carbald Supply Company, Carole Wever, CPA, is conducting a test of sales for 9 months of the year ended December 31, 2019. Included among her audit procedures are the following: 

1. Electronically re-add the sales journal and trace the balance to the general ledger. 

2. Review all sales transactions for reasonableness. 

3. Select a sample of recorded sales from the sales journal and trace the customer name and amounts to sales invoices and the related shipping document. 

4. Select a sample of shipping document numbers and perform the following tests: 

a. Trace the shipping document to the related duplicate sales invoice. 

b. Examine the sales invoice and agree to shipping document, shipping order, and customer order. 

c. Verify that the customer is included in the customer master file and sale does not exceed authorized credit limit. 

d. Examine sales file for evidence of internal verification of quantity, price, extensions, and invoice total, and trace the balance to the accounts receivable master file. 

e. Compare the price on the sales invoice with the approved price list and the quantity with the shipping document. 

f. Trace the balance on the sales invoice to the sales journal and accounts receivable master file for customer name, amount, and date. 

Required:

a. For which of these procedures can audit sampling for exceptions be conveniently used? 

b. Considering the audit procedures Wever developed, what is the most appropriate sampling unit for conducting most of the audit sampling tests? 

c. Set up a sampling data sheet following the format in Figure 15-2 (p. 505) using attributes or nonstatistical sampling. For all tests of controls, assume a TER rate of 5 percent and an EPER of 1 percent. For all substantive tests of transactions, use a 4 percent TER and a 0 percent EPER. Use a 10 percent ARO for all tests. Determine the sample size for each attribute. 

Figure  15-2

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FIGURE 15-2 Sampling Data Sheet: Tests of Hillsburg Hardware Co.'s Billing Function Client: Hillsburg Hardware Year-end: 12/31/19 Audit Area: Tests of Controls and Substantive Tests of Transactions- Pop. size: 5,764 Billing Function Define the objective(s): Examine sales invoices and related documents to determine whether the system has functioned as intended and as described in the audit program. Define the population precisely (including stratification, if any): Sales invoices for the period I/I/19 to 10/31/19. First invoice number = 3689. Last invoice number = 9452. Define the sampling unit, organization of population items, and random selection procedures: Sales invoice number, recorded in the sales journal sequentially; computer generation of random numbers.