Examples of Deviations. Dana Beckham, CPA, is performing an attributes samplingapplication for Posh Company. In doing so, Beckham is interested in determining whetherquantities on sales invoices are verified by client personnel and agreed with those on thecorresponding shipping documents. Per Posh Company’s instructions, client personnel aresupposed to place checkmarks next to the quantities on the sales invoices to identify thatthese quantities have been verified.During the tests of controls, Beckham selected a total of 100 invoices for examination. Ofthese invoices, 95 had checkmarks clearly indicated on them. Beckham’s examination of theremaining five invoices revealed the following:1. On one invoice, checkmarks were not placed next to the quantities; however, the designation “OK” was written next to them.2. One of the invoices selected for examination could not be located. Posh Company indicatedthat invoices occasionally are discarded when customers return the merchandise for credit.3. No marks or identification was noted next to the quantities on one of the invoices; however, this invoice was marked “VOID.”4. A checkmark was placed on an invoice; however, this checkmark was not adjacent to any ofthe quantities and could not easily be associated with specific quantities noted on the invoice.5. One of the invoices contained 15 different types of items. However, only five checkmarkswere placed on the invoice, all adjacent to items from the same location in the warehouse.Required:a. For each of the five invoices noted, indicate whether you believe the item represents adeviation. Please justify your treatment of the invoice.b. What is one fallacy associated with assuming that the internal controls related to the 95remaining invoices are functioning effectively?
Examples of Deviations. Dana Beckham, CPA, is performing an attributes sampling
application for Posh Company. In doing so, Beckham is interested in determining whether
quantities on sales invoices are verified by client personnel and agreed with those on the
corresponding shipping documents. Per Posh Company’s instructions, client personnel are
supposed to place checkmarks next to the quantities on the sales invoices to identify that
these quantities have been verified.
During the tests of controls, Beckham selected a total of 100 invoices for examination. Of
these invoices, 95 had checkmarks clearly indicated on them. Beckham’s examination of the
remaining five invoices revealed the following:
1. On one invoice, checkmarks were not placed next to the quantities; however, the designation “OK” was written next to them.
2. One of the invoices selected for examination could not be located. Posh Company indicated
that invoices occasionally are discarded when customers return the merchandise for credit.
3. No marks or identification was noted next to the quantities on one of the invoices; however, this invoice was marked “VOID.”
4. A checkmark was placed on an invoice; however, this checkmark was not adjacent to any of
the quantities and could not easily be associated with specific quantities noted on the invoice.
5. One of the invoices contained 15 different types of items. However, only five checkmarks
were placed on the invoice, all adjacent to items from the same location in the warehouse.
Required:
a. For each of the five invoices noted, indicate whether you believe the item represents a
deviation. Please justify your treatment of the invoice.
b. What is one fallacy associated with assuming that the internal controls related to the 95
remaining invoices are functioning effectively?
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