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What are some of the different types of sampling methods that are available to the auditor Answer

What are some of the different types of sampling methods that are available to the auditor? How does the auditor decide which method to use? How will the different methods affect the audit?


When performing audit, the auditor has the choice to go for statistical sampling or non-statistical sampling or both of them. Both sampling methods are efficient in providing the auditor with sufficient appropriate audit evidence about the financial statements and both audit sampling methods require that the auditor practice his judgment in planning and executing his plan and come out with the results. Sampling and non-sampling risks are applicable to both sampling methods. Non-statistical sampling may be as effective as statistical sampling and vice versa (Boynton, 2006).

In statistical sampling, the auditor may choose random sampling techniques, block sampling techniques, or systematic sampling techniques which all of them are a result of the use of the laws of probability that enable the auditor to control sampling risk. On the other hand, the auditor who uses non-statistical sampling must use professional judgment, derived basically from his/her own experience, to evaluate sampling risk (Boynton, 2006).

Statistical and non-statistical sampling methods do not affect audit and the auditor is using the same framework for planning and performing whatever sample used. Also, the choice of statistical or non-statistical sampling method does not affect the evidence achieved or the auditor response to the potential errors found in sample because, at the end, the auditor is practicing his/her professional judgment while either sampling (Boynton, 2006).



Boynton, W. C., & Johnson, R. N. (2006). Modern auditing: Assurance services and the integrity of financial reporting. (8th ed.). Hoboken, NJ: Wiley. Louwers, T., Ramsay, R., Sinason, D., & Stawser, J. R.. (2007). Auditing and assurance services. New York, NY: McGraw-Hill. Phoenix accountant (2012) retrieved from

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Project control should always focus on the critical path. “Time is the scarcest resource and unless it is managed nothing else can be managed Answer

Project control should always focus on the critical path. “Time is the scarcest resource and unless it is managed nothing else can be managed.” (Drucker, P. F. [n.d.]. Time quotes. Retrieved January 8, 2009, from you agree or disagree with the above statements? Why? Have you ever faced a situation in an organization where you worked previously or are working presently when you felt time is the scarcest resource? How did you handle the situation? Justify your answers with examples and reasoning.

One of the key activities that must be monitored across all projects, in some form, is time/schedule management. This is one of the fundamentals of the core ‘triple constraint’ (time, cost, quality/scope). Also, it is essential to define what tools and techniques one needs to deploy to effectively control the schedule. Critical path is the path with the longest duration through the network. If an activity on the path is delayed by certain duration, the project is delayed by the same amount of time. Project managers often put their best people on critical activities or on those activities that stand the greatest chance of becoming critical. They pay extra attention when doing risk assessment to identifying those risks that can impact the critical path, either directly or indirectly. The most obvious reason the critical path is important is because these are the activities that impact completion time. If the project schedule begins to slip, it’s the critical activities that project managers focus on to get back on schedule. Project managers assess the sensitivity of their network schedules to determine how much attention they should devote to managing the critical path.

When the critical path is known, it is possible to tightly manage the resources of the activities on the critical path so no mistakes are made that will result in delays. In addition, if for some reason the project must be expedited to meet an earlier date, it is possible to select those activities, or combination of activities, that will cost the least to shorten the project. Similarly, if the critical path is delayed and the time must be made up by shortening some activity or activities on the critical path to make up any negative slack, it is possible to identify the activities on the critical path that cost the least to shorten. If there are other paths with very little slack, it may be necessary to shorten activities on those paths also.

Another reason why the time could become scarcest resource in the project if there are some imposed deadline. Imposed deadlines are another reason for accelerating project completion. For example, the president of a software company remarks in a speech that new advanced software will be available in one year. Such statements too often become imposed project duration dates without any consideration of the problems or cost of meeting such a date. The project duration time is set while the project is in its “concept” phase before or without any detailed scheduling of all the activities in the project. Unfortunately, this practice almost always leads to a higher cost project than one that is planned using low-cost and detailed planning. In addition, quality is sometimes compromised to meet deadlines.

I have worked in my previous project where some unforeseen delays forced us to accelerate the project completion time. This was one such experience where the entire project team felt that we didn’t have enough time to complete the project deadline. We started focussing on the critical activities of the project to get back on schedule. We used the most common method for shortening project time i.e. to assign additional staff and equipment to activities. There are limits, however, as to how much speed can be gained by adding staff. Doubling the size of the workforce will not necessarily reduce completion time by half. Getting back on schedule usually requires compressing the time on some of the remaining critical activities. The additional costs of getting back on schedule need to be compared with the consequences of being late. This is especially true when time is a top priority.


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Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Answer


Smackey Dog Foods, Inc – Scenario Summary

Smackey is privately held.

Smackey Dog Foods, Inc. started in the kitchen of Sarah, Kim, and Jillian’s family home in the suburbs of Chicago.  The three sisters initially bought the ingredients for their natural dog food recipes from the local grocery store. They used their dogs and the neighborhood dogs as their taste testers.  Their dog food products were so good, the local kennels and veterinary offices were glad to distribute the sisters’ products to their customers.

Local demand increased significantly.  Local pet stores and small grocery stores discovered the products and became distributors.  The sisters moved the expanding business into a larger facility and hired a few more workers.  While their competitors’ sales were flat or declining, Smackey Dog Food, Inc.’s sales were on a vertical climb!

Sales were so good last year, that the sisters opened a boutique division named Best Boy Gourmet, specializing in freshly manufactured, one-serving packages meant for consumption no later than 3 days after production.  They sell this product at 3 times the cost of their other products and by special order only through their new website.  Demand is high, but waste has been an issue. Sarah is the president and general manager of the operation. Sarah has been very proactive in growing the business. She has met with her banker to discuss expanding the facilities and equipment with another $150,000 loan.  Their first loan for $150,000 was secured by the industrial size, food production equipment purchased with the loan. The banker now demands an audit of the corporate financial statements before releasing another loan to the company.  Sarah has offered to place the corporate account receivables up as collateral to secure the second loan.  Based on revenue projections by her sister Jillian’s sales team, Sarah believes that the company will not have trouble paying down the loan in a short period of time.

Kim manages the production operations.  She oversees the inventory, production, and shipment of dog food products.  The Best Boy Gourmet line has taken almost all of her attention lately.  The winter holidays are approaching and sales demand based on forecasts from the sales force are higher than ever.  Attaining fresh, raw ingredients is more difficult in the winter months.  If any of the fresh ingredients are delayed, production comes to a standstill. There has been significant inventory waste as a result.

Kim’s assistant, Henry, monitors the production and shipment of Smackey Dog Food’s regular line of product.  Henry takes pride in his work and is involved in every facet of the operation.  With only one other warehouse employee to help, Henry personally is involved in preparing and approving all inventory records.  Henry ensures that very little finished inventory sits in the warehouse.  However, the shipping dock always seems to be full of returned dog food that should be restocked.  When Kim asks him about it, Henry laughs and tells her that “first in first out” applies to dog food returns as well.  Kim smiles and just accepts that answer. Jillian is not very good at understanding accounting. The sisters placed Jillian in charge of sales.  She manages a sales team of 12 salesmen in Illinois, Indiana, and Wisconsin.  Her fear of flying and poor driving skills limit her ability to get around to the areas outside of Chicago. As a result, she has placed a lot of faith in her sales team.  The sales team complained last year that they did not like waiting for their commissions until after bookkeeping calculated the actual revenues.  In order to keep their spirits fired up, Jillian has her sales people project what their sales will be in the upcoming quarter and she pays commissions in advance on those projections.    The sales team loves her and Jillian loves their approval.  Jillian has noticed that the projections typically are off by 11% on average.

The employees of Smackey Dog Food, Inc. all own dogs. It was a hiring requirement on the job application. One employee was fired when it was discovered she never owned a dog when she was hired.  A lawsuit is pending by the fired employee.

At this time, the receivables represent 29% of the corporate assets.  The Chicago retail chain Pup Stores, Co. is Smackey Dog Food’s largest buyer.  They alone represent 31% of overall sales and usually pay within 30 days. However, Pup Stores is facing a major lawsuit from an animal rights group. The legal fees are eating into their cash reserves and they are facing some store closures. The accounts receivable aging indicates that 38% of the receivables are 30 days or less.  Twenty-two percent are 31-60 days.  Twenty-one percent of the receivables are 61-90 days old. Ten percent are 90-120 days. The remaining receivables are older than 120 days.  Sarah has not written off any of the receivables, nor will she.

Sales are projected to steadily grow at 16% next year if the company does not expand its facilities. With the expansion, sales are projected, rising 26%, with the most significant jump in the last quarter after expansion is completed and holiday sales pick up.

Your Role

You and your firm, Keller CPAs, have never audited a dog food manufacturer.  Although it is late in the year to be accepting a new calendar year-end audit, you need the work and have the time to devote to the audit before your 2-week ski vacation in February.

You begin the audit process just prior to year-end by sending your audit manager, Pete, and two audit staffers, Ben and Maureen, out to the client. They spend time assessing the client and planning the audit.

During the first month of field work after year end, Ben and Maureen note that the dog food bags piled high on the docks are marked “Returned.”  One employee is seen throwing bags of the premium Best Boy Gourmet dog food into the dumpster in the morning and pulling it out and throwing it into Henry’s car during the employee lunch hour.

Pete’s new best friend, Alan, was married to Smackey Dog Food, Inc.’s owner, Kim, 4 years ago. Alan is also good friends with the banker from whom Sarah is seeking the loan.  Pete is unaware of the relationship.  Pete has talked about some of the details of the audit to Alan over a few beers.