an auditor desired to test credit approval on 10 000 sales invoices processed during 602515
Items 1 and 2 are based on the following:
An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a statistical sample that would provide 1% risk of assessing control risk too low (99% confidence) that not more than 7% of the sales invoices lacked approval. The auditor estimated from previous experience that about 2 1/2% of the sales invoices lacked approval. A sample of 200 invoices was examined and 7 of them were lacking approval. The auditor then determined the achieved upper precision limit to be 8%.
In the evaluation of this sample, the auditor decided to increase the level of the preliminary assessment of control risk because the
- Tolerable rate (7%) was less than the achieved upper precision limit (8%).
- Expected deviation rate (7%) was more than the percentage of errors in the sample (3 1/2%).
- Achieved upper precision limit (8%) was more than the percentage of errors in the sample (3 1/2%).
- Expected deviation rate (2 1/2%) was less than the tolerable rate (7%).
The allowance for sampling risk was
- 5 1/2%
- 4 1/2%
- 3 1/2%
- 1%