Determine the size of the sample of sales invoices

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Question - You are now conducting your third annual audit of the accounts of A Company Ltd for the year ended 30 June 2019.

You decide to use unrestricted random number statistical sampling techniques in testing the effectiveness of the company's internal control procedures relating to sales invoices, which are all sequentially numbered. In prior years, after selecting one representative two-week period during the year, you tested all invoices issued during that period and resolved to your satisfaction all the errors that were found.

Required -

a. Explain the statistical procedures you would use to determine the size of the sample of sales invoices to be examined.

b. Assume that the company issued 50,000 sales invoices during the year, and the auditor specified a confidence level of 95% with a precision range of plus or minus 2%. Assuming that the size of the sample remains constant, would the auditor's confidence be higher or lower than 95% if the specified precision range is changed to plus or minus 1%? Explain.

Reference no: EM132484527

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