Chapter 9 Problem 30

In performing a test of controls for sales order approvals, the CPAs stipulate a tolerable deviation rate of 8 percent with a risk of assessing control risk too low of 5 percent. They anticipate a deviation rate of 2 percent.

a. What type of sampling plan should the auditors use for this test?

b. Using the appropriate table or formula from this chapter, compute the required sample size for the test.

c. Assume that the sample indicates four deviations. May the CPAs conclude with a 5 percent risk of assessing control risk too low that the population deviation rate does not exceed the tolerable rate of 8 percent?

d. Use ACL to compute the required sample size for the test. Assume that the population size is composed of 100,000 items.

e. Assume that the sample indicates four deviations using the sample size determined in d.

Use ACL to calculate the results. May the CPAs conclude with a 5 percent risk of assessing control risk too low that the population deviation rate does not exceed the tolerable rate of 8 percent?