Assume that your audit objective is to estimate a true but unknovirn population rate of deviation. The risk of assessing control risk too low is .05, the maximum tolerable rate of deviation is .07, and the expected population deviation rate is .0325.

Required:

1. Determine sample size.

2. What would be your statistical conclusion if four deviations were observed?

3. How would the sample results be interpreted in forming an audit conclusion?