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Hooplah, Inc.: Applying Audit Sampling Concepts to Testing of the Revenue Cycle
Hooplah, Inc.: Applying Audit Sampling Concepts to Testing of the Revenue Cycle
As a general rule for both parts of this case, anytime you need to make a judgment or an assumption, it is always best to justify and document why you made that decision. Your justifications will be important when I am grading your assignment. Moreover, your justifications will be tremendously important when/if you are working as an auditor.
Part A –The following are some notes that should help you complete the assignment. Be sure to answer all the questions in Part A of the case.
Please answer each question included in the printed case materials for Part A.
Use the information in Appendix A to determine the sample size for question 1. You will also want to explain your answer to part A. Note also that the relative importance of the control determines your assessment of the tolerable deviation rate.
The documents for the controls testing can be found at the following link: https://media.pearsoncmg.com/ph/bp/bridgepages/bp_beasley_bridgepage/7e/
For question 2b, your test should look only for evidence of a review of the credit memo. Don’t be anxious about the length of the question. It describes the process that should be followed for processing credit memos.
For question 3a, your test should be to reperform the control (i.e., do exactly what BT should have done).
If you find any exceptions, you’ll want to use the lower table in Appendix A to determine the upper deviation rates.
For question 4, think about the relationship between the effectiveness of internal controls and the extent of substantive testing that needs to be done. You may also likely comment on the relative mix of substantive analytics vs. tests of details that would need to be performed.
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