1. Refer to Fact Pattern 1 below (on the following page, taken from MC E,F). Assume you take a sample of 100 observations and find that 7 observations out of 100 deviated from the required controls. Please refer to the description above which states that the auditor can live with a population deviation rate of 10 percent and still rely on the controls as generally effective. What can you say about the sample evidence? Is it sufficiently strong to allow the auditor to rely on the internal controls of the population? The answer is no, but please explain. Point to specific data in the table to support your answer.

[Fact Pattern #1] Confidence Deviation Level Rate Field Size Sample Sizes for Precision of +1% +2% +3% +4% +5% +6% +8% +10% 95% 10% 200 82 65 77 196 140 103 81 400 500 1,000 2,000 217 151 108 464 278 178 121 604 322 195 129 51 88 92 50 51 53 99% 10% 91 64 200 400 193 149 117 76 79 52 53 500 214 162 124 85 56 1,000 2,000 399 272 193 142 498 314 213 153 854 89 58 [Fact Pattern #1] Confidence Deviation Level Rate Field Size Sample Sizes for Precision of +1% +2% +3% +4% +5% +6% +8% +10% 95% 10% 200 82 65 77 196 140 103 81 400 500 1,000 2,000 217 151 108 464 278 178 121 604 322 195 129 51 88 92 50 51 53 99% 10% 91 64 200 400 193 149 117 76 79 52 53 500 214 162 124 85 56 1,000 2,000 399 272 193 142 498 314 213 153 854 89 58