An auditor is applying statistical sampling for attributes to the testing of extensions of 1000 line items on sales invoices.A deviation is defined as an extension mistake on a line (i.e. line #39 quantity of 10 and unit price of $100 is calculated as $900).

The auditor decides to use a 10% Risk of Overreliance, a Tolerable Deviation Rate of 6%, and an expected population deviation rate of 2%.

Assume the following deviation condition exists in the population (the auditor would not know this):

Line #Amount of deviation overstated (understated)

39$(100)

114226

196(330)

202900

220700

22618

240950

2911126

347226

410(400)

425300

526550

6001000

674150

798(500)

840350

890925

906(820)

Required

a.Calculate the sample size.

b.Take ONE sample using random selection.Regardless of your answer to part "a", use a sample size of

100 lines.If you select a line number listed in the preceding deviation table, assume that a deviation

is found.

c.Quantitatively evaluate your sample results. [Use the "sample decision rule".]

d.Assume that your sample contains so many deviations that you as the auditor conclude that controls

are not acceptable.Develop a "population decision rule", as suggested in class.Use the population

decision rule to conclude that controls would be acceptable in this case.

e.Strictly as an overall Test of Controls, would the dollar amount of the deviations you found change

the evaluation of your results?Why or why not?