Question

In this mini-case you will complete the tests of internal controls on accounts payable for the audit of EarthWear Clothiers' 2022 financial statements. A sample size of 75 accounts payable voucher packets has been selected for the test of internal controls on the accounts payable system. The sample size is designed to provide high level of assurance (or confidence) that a control is operating effectively so long as one or fewer control deviations is observed for each control activity tested. The first 71 voucher packets have already been tested by other staff members and no errors have been found. Your task is to review the remaining four voucher packets.

INSTRUCTIONS:

Please download the files below to complete the audit tasks associated with this mini-case. The Excel workbook contains the instructions and workpapers you are to complete.

12e_Ch6_Mini_case_Control Testing Part A

12e_Voucher_Packet_164210

12e_Voucher_Packet_185423

12e_Voucher_Packet_190214

12e_Voucher_Packet_195840

Input your responses from Work Paper 6-1 and 6-2 into the corresponding questions in Connect.

Answer 1

Auditors are testing the effectiveness of internal controls in EarthWear Clothiers' accounts payable system by reviewing voucher packets based on a sample size designed to provide high assurance. Additionally, paired samples are used in a study to test a software patch's effectiveness by comparing pre- and post-patch system failures.

Step-by-step explanation:

In auditing the internal controls of EarthWear Clothiers' accounts payable system, we're conducting tests to ensure that the control activities are operating effectively. Given the parameters of the mini-case, a high level of assurance is achieved if one or fewer control deviations are found among the 75 accounts payable voucher packets sampled. The task involves checking the remaining four voucher packets for any deviations, following the work already completed by other staff members who found no errors in the first 71 packets.

Understanding Matched or Paired Samples

In a separate scenario, a study testing the effectiveness of a software patch involves matched or paired samples. The study looks at system failures before and after the patch is applied, with differences between these matched values analyzed statistically. Here, a significance test is conducted at the 1 percent level to determine if there is a significant reduction in system failures due to the patch.

Answer 2

In this mini-case, the auditor is conducting tests of internal controls on accounts payable for EarthWear Clothiers' 2022 financial statements.

Step-by-step explanation:

In this mini-case, the auditor is conducting tests of internal controls on accounts payable for EarthWear Clothiers' 2022 financial statements. The sample size for the test is 75 accounts payable voucher packets. The aim is to have a high level of assurance that a control is operating effectively if one or fewer control deviations are observed for each tested control activity.

Out of the 75 voucher packets, 71 have already been tested by other staff members and no errors were found. Therefore, the auditor needs to review the remaining four voucher packets to complete the audit tasks.

The auditor is instructed to download specific files containing instructions and workpapers in an Excel workbook to complete the audit tasks related to this mini-case.