Audit Sampling
Auditing Sample Case Study Memo
Team D (Wayne Brown, Melissa Ginez, Matthew Gourlie, Juel Rypka)
University of Phoenix
ACC/491
Alisa Dumond
December 19, 2011
------------------------------------------------- interoffice memorandum to: John Smith, CEO Key west company from: Audit Team D subject: Audit Findings for Key West Company date: 12/18/2011
-------------------------------------------------
Dear Mr. Smith
The purpose of this memo is to communicate to you the results and findings from our team’s assessment of the Accounts Receivable balances for Key West Company as of 20X1. Our team has already completed a thorough evaluation of the company’s internal control and we believe they are excellent. Therefore, the team has decided to use the Probability-proportionate-to-size sampling theory, (PPS). We have used PPS to find the evidence required to prove there has been no materially misstatement in Key West Company’s accounts receivable accounts.
The financial cycle is the cycles of business transactions, which involve the processing of financial activity including cash inflows, outflows, dividends, stocks, and long term debt agreements. Once an auditor can clearly identify what is involved in the financial cycle then the process may begin test the evidence found. According to FFIECIT, “This process is an essential part of the planning process, which involves designing and building automated control and security features into applications (2009).
In order to illustrate team D’s findings during the audit we have created a six-teen slide presentation showing our calculations and findings. In this presentation we will calculate the sample size, sampling interval. Then we will assume a series of misstatements to calculate the projected misstatement, allowance for sampling risk, and the upper misstatement limit.
The following are team D’s finding’s, which needs to brought to your attention. There are no internal control deficiencies, the
Team D (Wayne Brown, Melissa Ginez, Matthew Gourlie, Juel Rypka)
University of Phoenix
ACC/491
Alisa Dumond
December 19, 2011
------------------------------------------------- interoffice memorandum to: John Smith, CEO Key west company from: Audit Team D subject: Audit Findings for Key West Company date: 12/18/2011
-------------------------------------------------
Dear Mr. Smith
The purpose of this memo is to communicate to you the results and findings from our team’s assessment of the Accounts Receivable balances for Key West Company as of 20X1. Our team has already completed a thorough evaluation of the company’s internal control and we believe they are excellent. Therefore, the team has decided to use the Probability-proportionate-to-size sampling theory, (PPS). We have used PPS to find the evidence required to prove there has been no materially misstatement in Key West Company’s accounts receivable accounts.
The financial cycle is the cycles of business transactions, which involve the processing of financial activity including cash inflows, outflows, dividends, stocks, and long term debt agreements. Once an auditor can clearly identify what is involved in the financial cycle then the process may begin test the evidence found. According to FFIECIT, “This process is an essential part of the planning process, which involves designing and building automated control and security features into applications (2009).
In order to illustrate team D’s findings during the audit we have created a six-teen slide presentation showing our calculations and findings. In this presentation we will calculate the sample size, sampling interval. Then we will assume a series of misstatements to calculate the projected misstatement, allowance for sampling risk, and the upper misstatement limit.
The following are team D’s finding’s, which needs to brought to your attention. There are no internal control deficiencies, the
References: Boynton, W. and Johnson, R. (2006). Modern Auditing: Assurance Services and the Integrity of Financial Reporting (8th ed.). Hoboken, NJ: Wiley. California Board of Accountancy. (2005). A Manual of Disciplinary Guidelines and Model Disciplinary Orders 6th Edition 2005. Retrieved December 17, 2011, from www.dca.ca.gov/cba FFIEC IT Handbook InfoBase. (n.d.). Booklet: Development and Acquisition. Section: Development Procedures. Subsection: Systems Development Life Cycle. Retrieved December 17, 2011, from http://www.ffiec.gov/ffiecinfobase/booklets/d_a/08.html