Question

A local industrial company has two departments. In the larger department, about 45 sales invoices are

completed each day; in the smaller department about 15 invoices are completed each day. About 50%

of all sales invoices completed in each department specify discounts from the company’s list prices.

However, the exact percentage varies from day to day. Sometimes it may be higher than 50%, while

other times it might be lower.

For a period of one year, and for each department, a member of the internal audit staff kept track of the

number of days on which more than 60% of the sales invoices specified discounts.

Required:

Discuss which department you think showed the greater number of such days - The larger

department, the smaller department, or about the same and why?

Answer 1

The larger department would show such number of days in which the discount is more than 60% of the sales invoice specified discounts.

As there are most likely chances that the sales would be higher, it would be from the department which produces 45 sales invoice each day.

So, the larger department would show the greater number of such days in which the discount is more than 60% of the sales invoice specified discounts.

There can be some invoices from 15 invoice per day department, which would show more than 60 % discount.
But as far as internal audit is concerned, it should be carried out of the larger department.