Answer the two quetions

timer Asked: Apr 5th, 2018
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This is the homework in accounting

you can find at attachment two questions, please answer them

Question 1: Following is a set of situations that may or may not involve sampling. 1-An auditor is examining loan receivables at a local bank. The population of loans contains two strata. One stratum is composed of 25 loans that are each greater than $1 million. The second stratum contains 450 loans that are less than $1 million. The auditor has decided to test all loans greater than $1 million and 15 loans less than $1 million. 2. Assume the same facts as number 1 except that the auditor decides to apply analytical procedures to the second stratum of loans. 3. An auditor has haphazardly selected 30 sales invoices to be examined for proper pricing of the goods purchased by the customer. 4. The prepaid insurance account is made up of four policies that total $45,000. The auditor has decided that this account is immaterial and decides that no policies will be examined. Required: Indicate which situations involve audit sampling (statistical or nonstatistical) and why. 1234- Question 2: Calgari Clothing Company manufactures high-quality silk ties that are marketed under a number of trademarked names. Joe & Vandervelte LLP has been the company’s auditors for five years. Lisa Austen, the senior-in-charge of the audit, has reviewed Calgari’s controls over purchasing and inventory, and she determined that a number of controls can be relied upon to reduce control risk. Austen has decided to test two control procedures over purchases and inventory: (1) purchase orders are agreed to receiving reports and vendor’s invoices for product, quantity, and price; and (2) inventory is transferred to raw material stores using an approved, prenumbered receiving report. Austen decided to use a nonstatistical sampling approach based on the following judgments for each control procedure and has judgmentally decided to use a sample size of 75 purchase orders for control 1 and 30 receiving reports for control 2. Control Procedure Parameters Desired confidence 1 2 95 % 90 % Tolerable deviation rate 7 % 9 % Expected population deviation rate 2 % 2.5 % After completing the examination of the sample items, Austen noted one deviation for each control procedure. Required: What conclusion should Austen reach about each control procedure? 12-

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