THE CLIENT: MICRO TECH INDUSTRIES THIS COMPREHENSIVE PROBLEM CONCERNS THE PURCHASES/PAYABLES APPLICATION OF MICRO TECH INDUSTRIES, A PRIVATE COMPANY. THERE HAVE BEEN NO PERSONNEL CHANGES IN THE PAYABLES DEPARTMENT. ALL PERSONNEL ARE WELL-TRAINED AND EXPERIENCED. THE MAJOR AUDIT CONCERN HERE IS THAT SHIPMENTS RECEIVED ARE POSTED TO PAYABLES IN A TIMELY MANNER AS INDICATED IN THE FLOWCHART. COMPANY POLICY IS TO RECOGNIZEVEPAYABLES WITHIN 1 DAY OF REEIPT OF GOODS. THE FLOWCHART IN PURCHASES-PAYABLES-MANUAL SYSTEM IS RELEVANT TO THIS CASE. THERE WERE 3,405 VENDOR INVOICES FOR THE YEAR. PURCHASES TOTALED $8,435,665. THE ENGAGEMENT PARTNER HAS DECIDED THAT: CLIENT RISKINESS IS MODERATE. DESIGN EFFECTIVENESS OF CONTROLS OVER THE RELEVANT PROCEDURES DESCRIBED IN THE FLOWCHART IS EXCELLENT BECAUSE THIS IS A TEST OF A SYSTEM THAT HASEXPERIENCED PERSONNEL, PLANNING IS TO BE BASED ON DISCOVERY SAMPLING. YOUR FIRM'S AUDIT POLICIES THE FOLLOWING SUMMARIZES YOUR FIRM'S POLICIES F MAXIMUM TOLERABLE DEVIATION RATE [TDR] POPULATION CORPORATE GOVERNANCE RECORDED AMOUNT PRIVATE PUBLIC 1,000,000 AND 10,000,000 3% 2%FOR THIS COMPREHENSIVE PROBLEM ASSUME THAT ALL DATA ARE ANNUAL, THROUGH YEAR-END. [THIS IS AN UNREALISTIC SIMPLIFICATION] THE FOLLOWING RISK PLANNING TABLES APPLY TO BOTH PUBLIC AND PRIVATE COMPANIES: THE FIRM'S POLICY IS TO SPECIFY THE PRELIMINARY RISK OF MATERIAL MISSTATEMENT AS A BASIS FOR DETERMINING SAMPLE SIZE FOR TESTS OF CONTROL DESIGN EFFECTIVENESS PLANNED RISK OF MATERIAL MISSTATEMENT [RMM] EXCELLENT GREATER OF 5% OR 2*AR MODERATE GREATER OF 10% OR 2*AR WEAK 20% INEFFECTIVE OR NON-EXISTENT 100% THE FOLLOWING RISK PLANNING TABLE FOR DETYERMINING DETECTION RISK [DR] APPLIES TO BOTH PUBLIC AND PRIVATE COMPANIES: CLIENT RISKINESS PLANNED AUDIT RISK [AR] LOW 10% MODERATE 5% HIGH 1% YOUR FIRM APPLIES THE AUDIT RISK MODEL TO PLAN PROCEDURES, AS FOLLOWS: AR = RMM * DR IF DR CALCULATED IN THE AUDIT RISK MODEL IS > 25%, THEN USE 25%. YOUR FIRM CALCULATES RMM BASED ON THE SAMPLE RESULTS FIRM GUIDELINES FORBID REDUCING RMM BELOW THE LEVEL USED FOR PLANNING, SHOULD THE TEST OF CONTROLS YIELD A LOWER THAN PLANNED RMM. IN OTHER WORDS, RMM BECOMES THE RISK FOR DETERMINING DR.REQUIRED: ANSWER EACH PART DO EACH PART IN ORDER. EXTERNAL ATTRIBUTES SOFTWARE HAS BEEN LOADED TO THE APPROPRIATE SHEETS. EACH OF YOU WILL START YOUR RANDOM SELECTION IN PART 3A USING THE NUMBER BESIDE YOUR NAME. RANDOM START m NUMBERS 1 45316010 2 34330244 3 14993303 4 53221526 5 24361913 6 29256354 1 51911155 [::::]| 3 34033913 9 52921905 10 63535503 11 32412946 12 11149459 13 62166523 14 30429011 15 10596400 16 32921265 11 21493234 13 20525112 19 91030353 20 39136944 A. IDENTIFY THE POPULATION TO BE TESTED B. IDENTIFY THE FRAME LOCATE THE FRAME ON THE FLOWCHART [NEXT SHEET] C. IDENTIFY THE SAMPLING UNIT? LOCATE THE FILE CONTAINING THE SAMPLING UNITS [THE PRINCIPAL DOCUMENTS THAT YOU WILL INSPECT] ON THE FLOWCHART [NEXT SHEET] SU D. IDENTIFY THE DOCUMENT(S) THAT YOU WILL BE EXAMININGFOR DEVIATIONS