Chapter 8 ACL Problems

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; "..o@acl.com" http://www.acl.com/supportcenter/

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining Chapters.

Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

Use ACL to determine the sample size an auditor should use for attributes sampling given the criteria listed below:

1. With an ACL project (e.g., Roger Company) open, choose Sampling on the menu toolbar

2. Click on Calculate Sample Size

3. Choose the Record option Confidence is 95 Population is 1000 Upper Error Limit (%) is 8 (this is a tolerable error) Expected Error Rate (%) is 3

4. Click Calculate

5. What is the recommended sample size?

Problem 2

How would the sample size change if all sample-size inputs listed in Problem 1 stayed the same with the exceptions listed below? Please evaluate each item independently by resetting the inputs to those listed in Problem 1 and changing only the one factor listed in each item below. (Hint: If you use the Calculate button rather than the OK button the sample size window will stay open).

a. Confidence dropped to 90 percent?

b. Population increased to 500,000?

c. Expected Error Rate (%) increased to 4?

d. Upper Error Limit (%) decreases to 7?

e. Upper Error Limit (%) increases to 15?

Problem 3

Using your results from Problem 2 above:

a. Which of the following four input factorsconfidence, population, upper error limit, or expected error ratehas the smallest effect on the sample size?

b. Which two factors appear to have the greatest effect on sample size?

c. Go into ACL's sampling size tool and input the factors listed in Problem 1 and then experiment with increasingly larger expected error rates. What happens as the expected error rate is nearly as large as the upper error limit or tolerable error? Why does this happen?

Problem 4

For the following three control attributes, you want to be 90 percent confident that the population deviation rate does not exceed 7.5 percent.

• Attribute 1-The purchase order was approved (purchasing department stamp provides evidence)
• Attribute 2-The purchase order, receiving the report, and vendor invoice is included in each voucher packet
• Attribute 3-The accounts payable department compared product and quantities across the three documents (initials by an accounts payable clerk and auditor reperformance provide evidence)

You tested a sample of 52 voucher packages and discovered the following deviations:

• Attribute 1: 2 deviations
• Attribute 2: 1 deviation
• Attribute 3: 0 deviations

With an ACL project open (e.g., Roger Company) evaluate the results of your testing by:

1. Select Sampling >> Evaluate Error

2. Make sure Record is the selected sample type

3. Enter the applicable parameters (e.g., Confidence is 90 and Sample Size is 52, Number of Errors or deviations listed above)

4. Click OK

What is the upper error limit frequency for each attribute?

Based on the results of your controls testing, which controls are considered effective? Please explain why or why not?

Problem 5

Use ACL to complete problems 8-27 and 8-28 in your book. In ACL, the "upper error limit" is the same as the "tolerable deviation rate" and the "expected error rate" is the same as the "expected population deviation rate." For problems 8-27, does the population amount you enter change the results? For 8-28, use the sample sizes computed by ACL in 8-27. ACL's sample sizes and upper error limit frequency will differ from those computed using the tables in the textbook. Did the differences lead to different conclusions or auditor decisions?

Chapter 9 ACL Problems

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; "..o@acl.com" http://www.acl.com/supportcenter/

(Note: Unless otherwise instructed, please submit your answers to the following problems to your instructor in a word processing document.)

Messier/Glover/Prawitt End-of-Chapter 9, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

In addition to determining sample size, ACL can also select a random sample for you. Draw a sample of Accounts Receivable (AR) transactions from the Roger Company AR table assuming the confidence is 95, the upper error limit is 9 percent, and the expected error rate is 5 percent.

1. Open the Roger Company AR table

2. Select Sampling >> Sample Records and the Sample window appears

3. Make sure Record is the chosen Sample Type

4. Under Sample Parameters, click on the Random option

5. Click on the Size button so the Size Dialogue box opens

6. Enter the parameters as specified above (Note: The Population field should automatically have a value in it.)

7. Click on Calculate, click on OK

8. In the To field, type "Roger AR Sample"

9. Click OK

10. How many records are in the new Roger Company AR Sample table?

Problem 2

Assuming that the electronic data were difficult to obtain and that the client compiled the electronic data only for the sample you selected in Problem 1, evaluate the effectiveness of the control that the invoice date should always precede the due date.

1." Create a" filter in the Roger AR Sample table for the control described above

2. How many exceptions are there to the control above?

3. Select Sampling from the menu toolbar and click on Evaluate Error

4. Make sure Record is the selected sample type

5. Enter the appropriate parameters (i.e., Confidence 95, Sample Size 175, and the number of exceptions you observed)

6. Click OK

7. What is the upper error limit frequency?

Based on the results from the operations you completed above, can the control be considered effective? Why or why not?

Problem 3

Determine an appropriate sample size to test the Roger Company AR table using monetary unit sampling using the following inputs:

1. Open the Roger Company AR table

2. Sum the Amount field

3. Select Sampling >> Calculate Sample Size and the Size window appears

4. Make sure Monetary is chosen on the Main tab

5. Input the following:

• Confidence is 92 percent
• The population is the sum of the Amount field
• Materiality is 10000
• The expected Total Errors is 1500 6. Click on Calculate

7. What is the appropriate sample size?

Problem 4

"Create a" Roger Company MUS Sample table (or file) by selecting Sample >> Sample Records. Make sure MUS is the chosen sample "type and " Fixed Interval is the chosen option under Sample Parameters. Enter the appropriate Interval value from the results in Problem 3 (find interval under the calculated sample size), and chose 350 as the Start. Ignore the Cutoff field. Save the table as "Roger Company MUS Sample." How many records are in the sample table? Why is the sample size different from what was calculated in Problem 3?

Problem 5

Use ACL to complete questions b and c of problems 9-21 in your textbook. For problem "b" Use the Sampling >> Calculate Sample Size command. Take note of the interval in the results to use for problem c. For problem "c" use the Sampling >> Evaluate Error command. Input the data from problem "b" for confidence and the interval from the ACL results when you completed problem "b." Enter book value and error amounts in the "Errors" box for each misstatement discovered. Follow the notation "Item amount, Error" where "Item amount" is the book value and "Error" is the error amount or audit difference observed.