The audit sampling plan defines the objective of testing all purchase orders for proper authorization through signatures. The population includes 4617 purchase orders from 2020. A sample of 40 will be randomly selected and examined to determine if there is a signature, with deviations defined as missing signatures. The desired assurance level is 95% with a tolerable deviation rate of 5% and expected rate of 2.5%. The sample found 5 unsigned orders out of 40, a 1.25% deviation rate below the tolerable 5% rate, supporting reliance on the internal control.
The audit sampling plan defines the objective of testing all purchase orders for proper authorization through signatures. The population includes 4617 purchase orders from 2020. A sample of 40 will be randomly selected and examined to determine if there is a signature, with deviations defined as missing signatures. The desired assurance level is 95% with a tolerable deviation rate of 5% and expected rate of 2.5%. The sample found 5 unsigned orders out of 40, a 1.25% deviation rate below the tolerable 5% rate, supporting reliance on the internal control.
The audit sampling plan defines the objective of testing all purchase orders for proper authorization through signatures. The population includes 4617 purchase orders from 2020. A sample of 40 will be randomly selected and examined to determine if there is a signature, with deviations defined as missing signatures. The desired assurance level is 95% with a tolerable deviation rate of 5% and expected rate of 2.5%. The sample found 5 unsigned orders out of 40, a 1.25% deviation rate below the tolerable 5% rate, supporting reliance on the internal control.
• All purchase order should be signed by the management 2. Control Objective • To ensure that all purchase are properly authorized 3. Define the population • The population would be the purchase order for the year ended 2020 • There are 4617 sampling unit 4. Deviation • The deviation would be the purchase order that does not have management’s signature 5. Desired level of Assurance, tolerable Rate, and Expected deviation • The desired level of Assurance is 95% • The Tolerable rate is 5% • The Expected deviation is 2.5% 6. Sample Size • The auditor decides to examine 40 out of the total 4617 purchase order accounts in order to draw conclusion whether the total purchase order has management signature. 7. Sample Selection Method • The auditor used a computer software, excel in particular, to produce random numbers that match with the purchase order numbering system. 8. List of Selected Sample Item • 13498 • 11838 • 13157 • 12617 • 11484 • 11323 • 11962 • 11059 • 11592 • 10717 • 14444 • 13096 • 11205 • 14745 • 13418 • 12410 • 14782 • 12247 • 12434 • 11313 • 14181 • 10543 • 10626 • 12666 • 10856 • 13553 • 14204 • 12295 • 11809 • 13754 • 10767 9. Sampling Procedure • The auditor will have to review the purchase order to determine if the management signature is on it. the signature will indicate that the manager has approved the purchase and that the purchase is consistent with the organizat5ion’s mission. 10. Evaluate the sample result • Sample deviation 5/40= .125 • Compare Sample Deviation rate to Tolerable Deviation rate 1.25% < 5% Since Tolerable deviation rate id larger than sample deviation rate, the auditor will consider an allowance for sampling risk • 2% allowance for sampling rsik 1.25% + 2% = 3.25% 3.25<5% Since Tolerable deviation is larger, it is assumed that the sample result supported the planned degree of reliance on internal control.