Sam has provided the following additional information:

 The desired confidence level for the purpose of sampling is set at 95%, the tolerable deviation rate is 5%, and the expected
population deviation rate is 1%.
 A flowchart of the revenue process at MBCI prepared by the client.
 An audit plan prepared by Sam.
 Document coding convention at MBCI: The client uses group coding to number its source documents such as sales orders,
invoices, and shipping documents. They use a group code with four blocks:
- The first block is two letters that identify the type of document (e.g. SO for Sales Orders, SD for Shipping Documents,
and IN for Invoices).
- The second block has four digits and specifies the year (e.g. 2015).
- The third block has two digits and specifies the month (e.g. 12 for December).
- The fourth block has three digits and is used to number the series of documents for each sale (e.g. 901). A series of
documents for each sales transaction includes three documents; a sales order, a shipping document, and an invoice.
They are numbered, for instance, as follows, if the sale took place in December of 2015: Sales Order [SO-201512901],
Shipping Document [SD-201512901], and Invoice [IN-201512901]. Each sales transaction recorded in MBCI’s general ledger
is recorded with a reference to the shipping document related to that sale.
 A set of accounts receivable confirmation letters: Another group of auditors working under Sam’s supervision sent and
received some accounts receivable confirmation letters from MBCI customers. Sam has provided you with a set of returned
confirmation letters and asked you to use them as needed as additional supporting documents, while performing the
substantive procedures for transactions in the revenue process. The auditors who sent the accounts receivable
confirmation letters asked the client for shipping documents numbered SD-201512947 and SD-201512950, but the client
was unable to provide them.

1. Sample size calculation.

SAMPLE SIZE = 93
2. MANAGEMENT ASSERTIONS:

Existence or Occurrence
- Sales and related events that have been recorded have occurred and pertain to the entity.
- Verify that the accounts receivable balance represents amounts actually owed to the organization at the
balance sheet date.
- Establish that revenue from sales transactions represent goods shipped and services rendered during the
period covered by the financial statements.

Completeness
- All sales and related events that should have been recorded have been recorded.
- Determine that all amounts owed to the organization at the balance sheet date are reflected in accounts
receivable. Verify that all sales for shipped goods, all services rendered, and all returns and allowances for the
period are reflected in the financial statements.

Accuracy
- Amounts and other data related to sales transactions and events have been recorded properly.
- Verify that revenue transactions are accurately computed and based on current prices and correct quantities.

Cutoff
- Sales and related events have been recorded in the correct period.
Classification
- Sales and related events have been recorded in the proper accounts.
- Verify that the accounts receivable and revenues reported for the period are properly described and classified
in the financial statements.
 3. Next, for the third or last requirement, Based on the sample provided to us, we are to perform the necessary substantive
procedures related to the transactions in the revenue process to detect errors in the financial statements and supporting
documents. So, we documented the each error detected in the Error Documentation Worksheet.

We have here the number of errors, the description of the detected error from performing substantive procedures. Then
we identified the accounts affected due to that error as well as its effect on the overall financial statements. And lastly,
connecting the errors detected with compromised management assertion(s).

XError Documentation Sheet

No Description of Error Account(s) Affected Effect on Financial Assertion(s)
. Statement Compromised

1 The sales of East Supermarket with Sales and Payroll-Salary Sales, Gross Profit, Classification
sales order number SO-201512917 was and Wages and Payroll-Salaries
recorded in the Payroll-Salary and and Wages are
Wages account by mistake. understated.

2 The sales of Near Supermarket with Sales and Accounts Sales, Cost of Goods Completeness
sales order number SO-201512937 was Receivable upon Sales. Sold, Gross Profit, Net
not recorded in the general ledger. And Cash and Accounts Income and Accounts
Receivable upon Cash Receivable are
Collection. understated.

3 The sales of Far Supermarket with Sales and Rent Expense Sales, Gross Profit, Classification
sales order number SO-201512940 was and Rent Expense are
recorded in the Rent Expense account understated.
by mistake.

4 The sales of Red Supermarket with Sales and Accounts Sales, Cost of Goods Completeness
sales order number SO-201512949 was Receivable upon Sales. Sold, Gross Profit, Net
not recorded in the general ledger. And Cash and Accounts Income and Accounts
Receivable upon Cash Receivable are
Collection. understated.

5 The sales to Blue Supermarket with Sales and Accounts Sales, Cost of Goods Occurrence or
sales order number SO-201512950 was Receivable Sold, Gross Profit, Net Existence
recorded in general ledger but has no Income and Accounts
supporting documents. Thus, it does Receivable are
not exist. overstated.
6 The sales to North Supermarket with Sales and Accounts Sales, Cost of Goods Occurrence or
sales order number SO-201512947 was Receivable upon Sales. Sold, Gross Profit, Net Existence
recorded in the general ledger but has And Cash and Accounts Income and Accounts
no supporting documents. Thus, it Receivable upon Cash Receivable are
does not exist. Collection. overstated.

7 The item no. 7009 included in sales to Sales and Accounts Sales, Cost of Goods Accuracy
East Supermarket with sales order Receivable upon Sales Sold, Gross Profit, Net
number SO-201512917 has been Income and Accounts
inputted with the wrong unit price, it Receivable are
should have been $10 instead of $8. understated.

8 The sales of East Supermarket with Sales and Accounts Sales, Cost of Goods Cut-off
sales order number SO-201601963 is Receivable upon Sales; Sold, Gross Profit, Net
actually a sales for January 1, 2016 but and Cash and Accounts Income and Accounts
has been erroneously recorded in the Receivable upon Cash Receivable are
general ledger for the year ended Collection overstated.
December 2015.

9 The sales of Big Supermarket on with Sales and Accounts Sales, Cost of Goods Cut-off
sales order number SO-201601951 is Receivable upon Sales Sold, Gross Profit, Net
actually a sales for January 2016 but Income and Accounts
has been erroneoulsy recorded in the Receivable are
general ledger for the year ended overstated
December 2015.

10