Danny Ng, a public accountant, has decided to use attribute sampling during the audit of sales transactions. There are 100,000 sales transactions, and the preliminary assessment of control risk is low.

Required

a. Identify the factors Danny should use to decide an appropriate TER. Compare the sample size for a TER of 6 percent with that of 3 percent, all other factors being equal.

b. Identify the factors Danny should use to decide an appropriate ARACR. Compare the sample size for an ARACR of 10 percent with that of 5 percent, all other fac¬ tors being equal. ;■

c. Assume Danny selected 100 sales invoices to test for matching shipping documents with customer signatures. Determine the. CUER at a 5 percent ARACR if three exceptions existed in the sample. Explain the meaning of the statistical results in auditing terms.