auditing

Long Question - Sampling (8 marks) As the auditor for Cooper Corporation, you elect to use statistical sampling in performing tests of controls over purchase transactions. You perform the five following tests of internal controls. There is a population of 300 purchase orders for the year. You use random sampling in drawing your samples. After conducting the audit work, your results appear as follows: Internal Control Test (TDR) Tolerable Deviation Rate (UEL) Population Upper Error Limit 1. Purchase orders are pre-numbered and filed sequentially 6 2.1 2. Each Purchase Journal entry has a related Receiving Report 6 11.6 3. Each Purchase Journal entry has a date equal to the Receiving Report date 6 9.4 6 3.5 4. Each Vendor Invoice has a quantity equal to the Receiving Report 6 4.9 5. Vendor Invoice accuracy (price times quantity) is accurate REQUIRED: a) Which of the five controls are unreliable? Why? (3 marks) b) For each unreliable control, explain what your assessment would be in terms of control risk. (1 mark) c) What effect does your assessment of control risk in b) mean for the rest of your audit? Explain in detail. (2 marks) d) Identify the accounts of the financial statements that are effected by the unreliable controls. (2 marks) Long Question - Sampling (8 marks) As the auditor for Cooper Corporation, you elect to use statistical sampling in performing tests of controls over purchase transactions. You perform the five following tests of internal controls. There is a population of 300 purchase orders for the year. You use random sampling in drawing your samples. After conducting the audit work, your results appear as follows: Internal Control Test (TDR) Tolerable Deviation Rate (UEL) Population Upper Error Limit 1. Purchase orders are pre-numbered and filed sequentially 6 2.1 2. Each Purchase Journal entry has a related Receiving Report 6 11.6 3. Each Purchase Journal entry has a date equal to the Receiving Report date 6 9.4 6 3.5 4. Each Vendor Invoice has a quantity equal to the Receiving Report 6 4.9 5. Vendor Invoice accuracy (price times quantity) is accurate REQUIRED: a) Which of the five controls are unreliable? Why? (3 marks) b) For each unreliable control, explain what your assessment would be in terms of control risk. (1 mark) c) What effect does your assessment of control risk in b) mean for the rest of your audit? Explain in detail. (2 marks) d) Identify the accounts of the financial statements that are effected by the unreliable controls. (2 marks)