I. In sampling for attributes (i.e. test of controls) the determination of sampl
ID: 2600840 • Letter: I
Question
I. In sampling for attributes (i.e. test of controls) the determination of sample size is a function of (1) risk or assessing control risk too low (Sampling Risk), (2) tolerable rate and, (3) estimated population deviation rate. Fill in the spaces to indicate if the items have a direct or indirect effect on sample size. Direct or Indirect effect 1. Risk of assessing control risk 2. Tolerable rate. 3. Estimated population deviation rate II. (A) Based on the following information determine sample size too low (Sampling risk) Risk of assessing control risk too low (sampling risk) 10% Tolerable rate Expected population deviation rate 6% 29 (B) Regardless of your answer to (A), assume that you selected a sample size of 100, and determined that there were three ions) in the sample. Risk of Assessing Control Risk too low (i.e. Sampling risk) is 108. Evaluate the sample results to conclude whether controls are acceptable. Show your work! Controls are acceptable indicate either YES or NO) Explain your conclusion (i.e. Show work) 111. Assume that the Expected Population Deviation Rate is 2% for a control. The company is not publically traded, and thus, the auditor does not have to test controls. Even so, the auditor takes and evaluates a sample and concludes that the control is not acceptable. Assume that the population relating to the control consists of 10,000 items and that there are exactly 126 errors in the population. Based on the "population decision rule" discussed in class, was the decision (i.e. controls not acceptable) based on the sample correct? DISCUSS YOUR ANSWER.Explanation / Answer
1. (i) Risk of assessing control risk too low Direct Effect
(ii) Tolerable rate Indirect Effect
(iii) Estimated population deviation rate Indirect Effect
2.