UNIVERSITY OF THE WESTERN CAPE
DEPARTMENT OF ACCOUNTING
TERM TEST 2 2016
MODULE NAME : INTERNAL AUDITING 242
CODE: AUD 242
QUESTION 1
a) Verify the accuracy of the customer invoices (1)
b) Scope 1 July 2015 – 31 September 2015 (1)
c) Work programme
Working Paper 100.3
Engagement Client: Silapha Manufacturing Ltd
Engagement Objective: Verify the accuracy of the customer invoices
Period under review: 1 July – 31 September 2015
Date prepared: 6 November 2015
Prepared by: Second Year Auditor
Reviewed by: Mr I Mohamed
Planning section
Prepare work programme
1) Obtain list of invoices for the period under review from the sales manager. (1)
2) Cast the list of invoices and agree to the general ledger. (1)
3) Select a sample of the invoices from the list of invoices provided. (1)
4) Trace the job card for each invoice selected. (1)
5) Reperform the invoice from the job card. (1)
6) Cast the invoice for accuracy. (1)
Maximum 4 marks
1 mark for layout
QUESTION 3
a) Population – 2011 customer invoices (invoice numbers X10232 – X12242) (1)
Calculation of 2011 customer invoices (12 242 – 10 232 + 1)
Sampling unit – one customer invoice (1)
b) As no professional judgement will be applied, the type of sample is statistical
sampling. (1)
There are 2 options available:
Systematic – Sample is selected on a methodical selection based on orderly
steps. (1)
Random – An independent generator of numbers in no specific order. (1)
c) Attribute – Signature of sales manager on the sales invoice. (1)
Deviation – No signature of the sales manager on the sales invoice. (1)
d) Per product sample size
Type A
TDR = 10% (½)
Beta = 10% (½)
EPDR = 1% (½)
Sample size = 38 (1 error) (½)
Type B
TDR = 10%
Beta = 10%
EPDR = 1%
Sample size = 38 (1error) (1)
e) Per product evaluation and conclusion
Type A
Actual deviation = 3 (½)
Beta = 10% (½)
Sample size = 38 (½)
CUDR calculation
Sample
Errors
CUDR
size
35
3
18.1 (½)
40
3
15.9 (½)
5
2.2
Type B
Actual deviation = 1 deviation (½)
Beta = 10% (½)
Sample size = 38 (½)
CUDR calculation
Sample
Errors
CUDR
size
35
1
10.7 (½)
40
1
9.4 (½)
5
1.3
= 2.2 / 5 x (40 – 38)
= 0.88
= 15.9 + 0.88
= 16.78% (2)
= 1.3 / 5 x (40 – 38)
= 0.52
= 9.4 + 0.52
= 9.92% (2)
I am 90% confident that the actual deviations in the population are not greater
than 16.78% in Type A and 9.92% in Type B. (1)
As the tolerable error rate is 10%,
Individual assessment of controls:
Type A the control is ineffective,
Type B, the control is effective. (1)
Aggregate assessment of controls:
Population (12242 – 10232 + 1) = 2011
Type A (2011 x 80%) = 1609 x 16.78% = 270 invoices has deviations
Type B (2011 x 20%) = 402 x 9.92% = 40 invoices has deviations
Therefore, (270 + 40) / 2011 = 15.42% (2)
This is greater than the TDR of 10% therefore control in aggregate, as the
same sales manager authorises the sales invoice, is ineffective. (1)