Barry Menziwalked Out of the Old Country Bakery Operation and Chewed

question 29

Essay

Barry Menziwalked out of the Old Country Bakery operation and chewed on a Cheese Danish. He had chosen random selection to test for proper authorization of purchasing transactions. He had just completed the initial audit testing of the purchasing transactions and had evaluated the results. His conclusion was that the deviation rate of 12 exceptions in a sample of 80 transactions was relatively high. In addition, Barry was preparing to start the audit of another client, Rohr Industries, an airplane component manufacturer. He had discussed sampling methodology with his audit team and it had been determined that the Rohr Industrisystems did not lend themselveasily to statistical sampling techniques. The audit team would have to employ non-statistical sampling. Required:
a) What is the procedure that Barry Menzies would follow when his initial testing showed a relatively high deviation rate for the Old Country Bakery transactions?
b) What is non-statistical sampling?
c) Describe the non-statistical sampling methods that were open to Barry and his team for the Rohr Industries audit.
d) Which of Barry's two clients' systems would lend themselves to stratification?

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Definitions:

Express Repudiation

The clear and unequivocal refusal to honor a contract or agreement, effectively declaring one's intention not to perform their contractual obligations.

Quantum Meruit

A legal principle allowing a party to recover costs for services provided when no contract exists, based on the reasonable value of the work.

Specific Performance

A legal remedy in contracts where the court orders the party who breached the contract to perform the promised action rather than simply paying damages.

Liquidated Damages

Predetermined monetary compensation agreed upon by parties in a contract as a remedy for specific breaches, especially delays.