EarthWear Hands-on Mini-caseChapter 8 - Tests of Controls (Part B)© The McGraw-Hill Companies, Inc., 2014

INSTRUCTIONS:

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Fields you are to complete on work papers are colored yellow. The color will disappear when the field is completed.

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In this mini-case you will statistically evaluate the tests of controls on accounts payable for the 2014 audit of EarthWear Clothiers, Inc.

Use ACL to compute (1) the Sample Size for each control activity and (2) the Upper Deviation Rate for the sample results provided on Work Paper 8-1. Record the results from ACL in the fields on Work Paper 8-1 indicated in yellow. For control activities where the results are rejected, please describe any necessary changes to the audit plan. Please refer to Chapter 8 of the textbook for instructions on using ACL.

When you have completed the work paper, enter your initials in the yellow box in the upper right-hand corner of Work Paper 8-1 (box indicates "Initial Here").

Please print a hard copy of Work Paper 8-1 to submit unless your instructor requests an electronic submission. The work paper is formatted to fit on one page.

Name:

Class:

EARTHWEAR CLOTHIERS 8-1 Control Activities Testing - Sampling and Evaluation Sheet: Accounts Payable Initial Here

December 31, 2014 4/19/2023

Compute Sample Size

Description of Control Activities Population Sample Size

1 Document packet includes all documents appropriate for the transaction. 90% 2,147 5% 1% Enter Here

2 The Purchase Requisition is signed by a supervisor. 90% 2,147 10% 4% Enter Here

3 The Purchase Order is signed by an authorized purchasing agent. 90% 2,147 10% 1% Enter Here

4 90% 2,147 5% 1% Enter Here

5 All documents in voucher packet have been stamped "paid". 90% 2,147 10% 1% Enter HereSample Size Used 0

Compute Upper Deviation Rate

Description of Control Activities

1 Document packet includes all documents appropriate for the transaction. 90% 0 0 Enter Here

2 The Purchase Requisition is signed by a supervisor. 90% 0 2 Enter Here

3 The Purchase Order is signed by an authorized purchasing agent. 90% 0 1 Enter Here

4 90% 0 1 Enter Here

5 All documents in voucher packet have been stamped "paid". 90% 0 0 Enter Here

The list below indicates the control activities tested using voucher packets in Part A (Part A was a Chapter 6 assignment, but you can complete this assignment even if you did not complete Part A). Use the information provided below to calculate the sample size using ACL. Please refer to Chapter 8 of the textbook for instructions on how to use ACL to calculate sample sizes. When different sample sizes are computed for control activities that will be tested concurrently, it is common to use the largest sample size computed for testing all control activities (see Chapter 8 for a more detailed description).

Desired Confidence

Level

Tolerable Deviation Rate (%)

Expected Population Deviation Rate (%)

Quantities on vendor's invoice agree with related receiving report and purchase order, and invoice is mathematically correct.

The list below indicates the test of controls results for each control activity. Use the information provided to evaluate the results using ACL. Please refer to Chapter 8 for instructions on using ACL to evaluate test results and to compute the upper deviation rate. After you compute the upper deviation rate, determine whether the test results met the objectives and can be accepted (i.e., determine whether the computed upper deviation rate is below the tolerable deviation rate noted above for the control activity). Select "Accept" or "Reject" from the drop down menu in each cell of the Accept/Reject column. For control activities that you reject, please indicate necessary revisions to the audit plan.

Desired Confidence

LevelSample

SizeNumber of Deviations

Computed Upper

Deviation Rate (%)

Accept/ Reject

Describe Any Necessary Revisions to the Audit Plan

Quantities on vendor's invoice agree with related receiving report and purchase order, and invoice is mathematically correct.