Shoe & Shoe, a CPA firm, wants to adopt a sampling plan for tests of transaction classes based on the Poisson distribution, with the following specifications:

A risk of assessing control risk too low fixed at 5 percent Tolerable rates corresponding to levels of control risk of

-Low 5%

-Moderate 10%

-Maximum (Omit test)

Required:

a. What is the minimum sample size that Shoe & Shoe should use for tests of transaction classes to permit assessment of the control risk at less than maximum?

b. What is the maximum sample size that Shoe & Shoe should use for tests of transaction classes?

c. Without regard to your answer to

b, assume that Shoe & Shoe specifies a maximum sample size of 120. Construct a sample planning and evaluation table for Shoe & Shoe to incorporate in a work paper that permits evaluations of samples that find up to 3 deviations.