Client: 6734 to last number 33722 Define the

 
Client:  Pinnacle Manufacturing
 
 
 
 
 
 
 

 
Audit Area:  Tests of Controls and
Substantive Test of Transactions–Acquisitions.
 
 
 

 
 
 
 
 
 
 
 
 
 

 
Define the Objective(s):  Examine vendor
invoices, purchase orders to verify is working as documented in the audit
program.

 
 
 
 
 
 
 
 
 
 

 
Define the population
precisely (including stratification, if any):  Vouchers from first number 6734 to last
number 33722

 
 
 
 
 
 
 
 
 
 

 
Define the sampling unit,
organization of population items, and random selection procedures:  
 

 
Organization of
population items, and random selection procedures in excel
 
 
 

 
Description
of Attributes
Planned Audit
Actual Results

EPER
TER
AROR
Initial
sample Size
Sample Size
Number
of Exceptions
SER
Calculated
Sampling Error          (TER-SER)

1.
Evidence of
internal verification: dates, unit costs, prices, extenstions and footings,
posting and summarization, etc.
1%
6%
Low
75
75
2
2.67%
3.33%

2.
Compare
prices on vendor invoices to the price limits established by management
0%
5%
Low
50
50
0
0.00%
5%

 

3.
Recompute
information on the vendor invoices
1%
5%
Low
75
75
0
0.00%
5%

4.
Examine
the vendor invoices for proper account classification
2%
5%
Low
100
100
0
0.00%
5%

5.
Verify
the dates of the acquistions recorded with the dates on the receiving reports
1%
5%
Low
75
75
2
2.67%
2.33%

6.
Examine
the purchase orders for evidence of internal verification
0%
6%
Low
50
50
0
0%
6%

Results: 

1. Effect on Audit Plan: Controls
tested through attributes 1-6 can be viewed as operating effectively given
the size of the allowance for sampling error (TER-SER).

There
is additional emphasis needed on the following: confirmations, cutoff
testing, and price testings for the financial statement audit due to the
results found

in
testing of attributes 1 and 5. 

2.Effect on Report on Internal Control: Controls tested through attributes 1-6 can be viewed as
oeprating effectively given the size of the allowance for sampling error.

3. Recommendations to Management:
All of the exceptions should be reviewed individually with management,
specific recommendations are needed to correct the internal 

verification
of vendor invoices and to improve their cutoff procedures.