Question
Below are situations that illustrate tests of controls performed as a part of an attribute sampling application. Match each description of a situation (1-5) with
Below are situations that illustrate tests of controls performed as a part of an attribute sampling application. Match each description of a situation (1-5) with the related term (A-F). Each term is associated with only one description. A. Expected deviation rate B. Risk of assessing control risk too low C. Risk of assessing control risk too high D. Tolerable deviation rate E. Upper limit deviation rate. F. Sample deviation rate. ___ 1. Based on a random sample, Fitzmaurice, CPA, found that the tolerable deviation rate was less than the upper limit deviation rate and assessed control risk at the maximum. Unknown to Fitzmaurice, the true deviation rate in the population was less than the tolerable deviation rate. ___ 2. Grayson, CPA, calculated the statistical estimate of the population deviation rate as the sum of the sample deviation rate and sampling risk. ___ 3. Based on experience with the client and industry, Herbert, CPA, estimated that a 3% deviation rate exists in the client's credit approval of sales invoices this year. ___ 4. Jones, CPA, found four deviations from prescribed control procedures in her sample of 100 sales invoices. ___ 5. Based on a random sample, Kelly, CPA, found that the upper limit deviation rate was less than the tolerable deviation rate and assessed control risk as moderate, as originally planned. Unknown to Kelly, the true deviation rate in the population was greater than the tolerable deviation rate. ___ 6. Alison required the control that all sales invoices were supported by a bona fide shipping document to be functioning very effectively because of the importance of this control.
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