a) Describe what is meant by a “sampling unit”. (10 marks)
b) State an effective audit procedure for testing the possibility of omitted sales for SEQ Ltd. What is the sampling unit? (5 marks)
c) State an effective audit procedure for verifying the existence of recorded sales for SEQ Ltd. What is the sampling unit? (5 marks)
d) Explain why the sampling unit for testing the possibility of omitted sales might differ from the sampling unit for verifying the existence of recorded sales. (10 marks)
e) Margorie Smith, an accounting graduate and junior member of your audit team for SEQ Ltd, performed tests of controls and substantive tests of transactions of sales for the month of September in an audit of SEQ Ltd’s financial statements for the year ended 30 June 2015. Based on the excellent results of both the tests of controls and the substantve tests of transactions, she decided to significantly reduce her substantive tests of details of balances at year end. Evaluate this decision. (70 marks).