Audit Sampling in Tests of Control Activities A. Define audit sampling. B. Which word properly completes each of the following statements 1. Decreasing the risk of assessing control risk too low from 10% to 5% will cause the sample size to: Increase ___ Decrease ____ 2. Decreasing the tolerable deviation rate from 5% to 4% will cause the sample size to: Increase ___ Decrease ______ 3. Decreasing the expected population deviation rate from 1% to 0.5% will cause the sample size to: Increase ___ Decrease _____ C. The following items have been recorded in the internal auditors working papers: Invoice Number Prescribed Control Finding 1472 Credit department authorization Evidence of credit department of credit approval of invoice. Amount of invoice exceeds maximum credit limit. 1545 Shipping department verification No evidence of shipping department of agreement of goods verification but invoice agrees shipped with sales order. with sales order. 1719 Credit department Name of authorizer not included on authorization of credit. approved signature list. Auditor investigation disclosed a new hire in credit whose name was inadvertently omitted from the authorized list of signers. Indicate for each invoice number whether it represents a deviation from the prescribed control activity. Briefly explain the reason for each answer. D. The following information concerning one of the prescribed control activities has been accumulated: Estimated number of transactions per year 5000 Risk of assessing control risk to low 5% Tolerable deviation rate 4% Expected population deviation rate 0.5% Sample size per table 117 Sample size used 125 Number of deviations found 2 Sample deviation rate 1.6% Upper deviation limit 4.9% Allowance for sampling risk 3.3% Evaluate the sample results. Your answer should include: 1. A statistical conclusion, and 2. The audit decision you would make based on the quantitative sample results. Be sure to include the reason for this decision