Your Audit Team Has Established The Following Parameters For The

Your audit team has established the following parameters for the examination of ELM’s control over the authorization of sales:

Population size …………………………. 388 shipments

Risk of overreliance ……………………………….. 10%

Expected population deviation rate ………………… 1%

Tolerable rate of deviation …………………………. 6%

Required:

Using IDEA, perform the following related to ELM’s control over credit approvals.

a. Determine the appropriate sample size. Based on the sample size and preceding parameters, how many deviations could be observed without the audit team reducing their reliance on the authorization control?

b. Using systematic random selection, a random start of 23, as well as the sample size in part (a), select sample items from the population. What are the first five transactions that will be selected for examination?

c. After performing your tests of controls, you have identified three deviations in your sample. What is the ULRD? What conclusion would you draw with respect to the functioning of ELM’s controls over the authorization of sales?

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