Audra Dodge, CPA, is performing an attributes sampling plan for her audit of Truck Company. In her audit of cash disbursements, she has identified preparing a voucher and marking it as “paid” prior to preparing and mailing a check to the vendor as an important control. Dodge defined any voucher that was not marked as “paid” as being a deviation.
In performing her sampling application, she established the following parameters:
Risk of overreliance.......... 5 percent
Expected population deviation rate....... 2.75
percent Tolerable rate of deviation.... 7 percent
a. Identify what factors Dodge considered in establishing the risk of overreliance, expected population deviation rate, and tolerable rate of deviation.
b. Assume that Dodge wished to place additional reliance on this control. How would that affect the three parameters in (a)?
c. Based on the original parameters, use AICPA sample size tables to determine the appropriate sample size.
d. If Dodge selected the sample size in (c) and found four deviations, what is the sample rate of deviation?
e. Using AICPA sample evaluation tables, determine the upper limit rate of deviation.
f. What would Dodge’s conclusion be with respect to the functioning of this control?

  • CreatedOctober 27, 2014
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