EXHIBIT 3 SECTIONS FROM THE AUDIT TRAINEE'S AUDIT FILE CONT\"D Accounts receivable Fifty negative conrmations were sent to the largest accounts. As none of the confirmations were returned no further work was done. Customers have 30 days to pay invoices, but most take advantage of the 2% discount offered for payment within 10 days. A sample of five yearend balances were tested, and all payments were received subsequent to yearend, so accounts receivable were deemed reasonable at yearend. Three of the samples tested for payments subsequent to yearend received discounts for being paid within 10 days. However, when the receipts were traced to the bank deposits, it was noted that the customers had made full payments and were received within the it} day discount period. The discounts appeared to be reimbursed later by systemgenerated cheques, but the cheques could not be traced to any backup documentation. As a result of this lack of documentation, no additional work was done in this area. Since the customers had earned the discount, it was correct for them to be reimbursed. Historically, the amount of uncollecble accounts ranged from 3% to 4%. In order to save time, Superior applied a blanket provision of 5% for uncollectible accounts. Credit procedures were tightened two years ago, and since then, the rate has been at the lower end of the historic range. Accordingly, 5% is quite conservative, allowing for potential understatement of receivables. Required i} For the accounts receivable work performed, using concepts from audit sampling theory explain two deciencies related to the audit trainee's selected sample and the conclusions reached by the audit trainee on the samples selected (minor variances, immaterial}. Provide the correct audit procedure you would recommend to address these deficiencies. (4 marks) Recommendation Correct Procedure