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)

81 150

202 900

220 700

240 950

291 (300)

526 (1126)

600 1000

798 500

840 350

890 925

906 (820)

908 (1200)

971 200

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.

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 # 39 81 202 220 240 291 526 600 798 840 890 906 908 971 Amount of deviation overstated (understated) $ (100) 150 900 700 950 (300) (1126) 1000 500 350 925 (820) (1200) 200 Required a. Calculate the sample size. b. Take ONE sample using random selection. Regardless of your answer to part \"a\