1. Sampling Attributes

AVF Company processes an average of 400 vouchers payable every month. Each voucher package contains a copy of the check disbursed and supporting documents such as vendor invoic

Question

1. Sampling Attributes

AVF Company processes an average of 400 vouchers payable every month. Each voucher package contains a copy of the check disbursed and supporting documents such as vendor invoices, receiving reports, and purchase orders. The internal auditor plans to examine a sample of vouchers listed in the voucher register using attribute sampling to evaluate the effectiveness of several controls. The attributes of interest include:

Agreement of voucher amounts with invoice amounts.
Voucher canceled after payment.
Based on experience, the auditor expects a deviation rate of 2 percent for the first attribute and 1 percent for the second. He decides on a tolerable deviation rate of 7 percent for the first attribute and 6 percent for the second. He sets the risk of assessing control risk too low at 5 percent.

Assume that the auditor’s tests uncovered two occurrences of voucher amounts not agreeing with invoice amounts and two occurrences of vouchers not being canceled after payment.

a. Complete the following schedule. (Note: round sample size per table up to next number ending in zero for sample size used.) And evaluate the sample results for the two attributes. Your answe

VIPSolutions · Accepted Answer

Let's walk through the requirements for each attribute and fill in the schedule step by step, including sample size calculation, sample deviation rate, and evaluation.

### Attribute Sampling Table (using standard tables, e.g., AICPA or ACL/IDEA)  
#### Given:
- Population: 400 vouchers per month (assume one month is the population for this test)
- **Attribute 1:** Voucher amount agrees with invoice amount  
- **Attribute 2:** Voucher cancelled after payment  
- Risk of assessing control risk too low (sampling risk): **5%**  
- **Tolerable deviation rate:** 7% (Attr 1), 6% (Attr 2)  
- **Expected population deviation rate:** 2% (Attr 1), 1% (Attr 2)  
- Number of deviations found in sample: 2 (for each attribute)

Let’s use a standard attribute sampling table such as those found in the AICPA Audit Guide (Attribute Sampling Table 6-3).

#### Step 1: Determine Sample Size from Table

**Attribute 1:**  
- Tolerable deviation rate: **7%**  
- Expected deviation rate: **2%**  
- Risk of assessing control risk too low: **5%** (confidence level = 95%)

**Attribute 2:**  
- Tolerable deviation rate: **6%**  
- Expected deviation rate: **1%**  
- Risk of assessing control risk too low: **5%** (confidence level = 95%)

**From standard tables:**  
- For Risk of assessing control risk too low = 5%,  
    - Expected rate = 2%, Tolerable rate = 7% → **Sample size ≈ 68**  
    - Expected rate = 1%, Tolerable rate = 6% → **Sample size ≈ 88**

(Round up to next number ending in zero, per the instructions.)
- **Sample size used, Attribute 1 = 70**
- **Sample size used, Attribute 2 = 90**

#### Step 2: Calculate Sample Deviation Rate

- **Sample Deviation Rate = (Number of deviations / Sample size used) x 100%**

**Attribute 1:**  
- = (2 / 70) x 100% = **2.86%**

**Attribute 2:**  
- = (2 / 90) x 100% = **2.22%**

#### Step 3: Achieved Upper Deviation Limit (UDL)

The UDL (or computed upper error limit) is the statistical upper bound for the true population deviation rate based on the sample, at the specified confidence level (95%). This is typically found in attribute sampling tables based on sample size and number of deviations.

Using standard audit attribute sampling tables (e.g., AICPA Table 6-4):

- For **Attribute 1**: n = 70, deviations = 2, 95% confidence  
    - UDL ≈ **7.4%**

- For **Attribute 2**: n = 90, deviations = 2, 95% confidence  
    - UDL ≈ **6.1%**

#### Step 4: Statistical Conclusion & Audit Decision

- If **UDL  Tolerable deviation rate**, control is not effective (cannot rely on control).

**Attribute 1:**
- Tolerable rate: 7%, UDL: 7.4% → **UDL > Tolerable**
    - **Statistical Conclusion:** Control is **NOT effective** at this attribute.
    - **Audit Decision:** Cannot rely on this control for this attribute; increase substantive testing or adjust control risk.

**Attribute 2:**
- Tolerable rate: 6%, UDL: 6.1% → **UDL > Tolerable** (just over)
    - **Statistical Conclusion:** Control is **NOT effective** at this attribute.
    - **Audit Decision:** Cannot rely on this control for this attribute; increase substantive testing or adjust control risk.

---

## Completed Table

| Attribute                 | Attribute 1             | Attribute 2             |
|---------------------------|-------------------------|-------------------------|
| Risk of assessing CR too low | 5%                      | 5%                      |
| Tolerable deviation rate  | 7%                      | 6%                      |
| Expected population deviation rate | 2%            | 1%                      |
| Sample size per table     | 68                      | 88                      |
| **Sample size used**      | **70**                  | **90**                  |
| Number of deviations identified | 2                | 2                       |
| **Sample deviation rate** | **2.86%**               | **2.22%**               |
| **Achieved UDL**          | **7.4%**                | **6.1%**                |

---

## Summary of Statistical Conclusions and Audit Decisions

### Attribute 1:
- **Statistical conclusion:** The achieved UDL (7.4%) **exceeds** the tolerable deviation rate (7%). Control is **not effective**.
- **Audit decision:** Do **not** rely on this control. Increase substantive procedures or adjust control risk assessment upward.

### Attribute 2:
- **Statistical conclusion:** The achieved UDL (6.1%) **exceeds** the tolerable deviation rate (6%). Control is **not effective**.
- **Audit decision:** Do **not** rely on this control. Increase substantive procedures or adjust control risk assessment upward.

---

**If you need the precise UDL calculation using the formula or want the table reference, let me know!**

✨ VIPSolutions

Question:

Final Answer:

📢 Instructions:

Study Help, Fast Answers

✨ VIPSolutions

Question:

Final Answer:

📢 Instructions:

Related Answers

Study Help, Fast Answers