Requirements

$1.$ Based on the deficiencies in the design of controls identified in the sales processing subset of

the revenue cycle as explained in the first two paragraphs of this module, does the sampling plan

and testing described in the previous paragraph address all relevant financial statement assertions

related to sales and accounts receivable? If not, which assertion$($s$)$ are not considered in the

initial plan, and how could the plan be adjusted to address these assertions?

$2.$ Retrieve the file titled $20$X$9\_$attrib.$($Link$)$ Using the sample size and sample evaluation

tables from our textbook and the following data, complete the attribute sampling plan worksheet

$($in using the $$Sample Results Evaluation$$ table, select the sample size that is closest to your

sample size$)$:

a$.$ The auditor sets the risk of overreliance at $5\%($implying that the auditor is willing to accept a

$5\%$ chance that inferences from the sample will be incorrect$).$ A $5\%$ risk of overreliance

$($sampling risk$)$ is reflected in the $20$X$9\_$attrib file.

b$.$ Misstatements have been defined, and expected deviation rates set for each attribute as

follows:

$1)$ Bill of lading not attached to packet: $1\%$

$2)$ Incorrect prices: $1\%$

$3)$ Extension and$/$or footing errors: $0\mathrm{.}5\%$

$4)$ Quantities and$/$or product type not in agreement with customer order: $1\%$

$5)$ Customer balance exceeds authorized credit limit: $1\mathrm{.}5\%$

c$.$ Tolerable deviation rates $($sometimes referred to as the tolerable failure rate$)$ of $4\%$ have been

set for all attributes; and

d$.$ Assume that the sample has already been selected and audited and the following

misstatements were found in examining the sample:

Sales Order Number Misstatement

$12511$ Bill of lading not signed by carrier

$15439$ Invoice causing customer to exceed authorized credit limit

$18616$ Bill of lading missing

$23468$ Bill of lading missing

$27891$ Bill of lading missing

$3.$ What conclusions can you draw based on your completed sampling plan worksheet? What

impact might your findings have on the substantive audit programs for Brony$$s Bikes? Based on

the results of your testing, should the aggregate materiality threshold be changed for any part of

the revenue cycle?