This question is designed to test your knowledge of alpha and beta risks in estimation sampling for variables.

Required:

a. Compute the maximum planned beta risk to specify in a statistical test for each of the following situations if your desired combined reliability is 95 percent, supplemental audit procedure effectiveness is 10 percent, and internal control effectiveness is: (1) 90 percent, (2) 70 percent, and (3) 50 percent.

b. In estimation sampling, will your resulting sample size be larger or smaller if internal control is 90 percent effective rather than 50 percent effective, when all other factors are equal?

c. Will your resulting sample size be larger or smaller if you specify 50 percent beta risk rather than 11 percent?

d. If you want 5 percent alpha risk and 10 percent beta risk, what precision should you specify in the sample size tormula if \(\$ 100,000\) is material?

e. The achieved beta risk should be (greater/less) than or equal to the planned beta risk?

f. If you expect several differences in the sample, should you plan a high or low alpha risk? Why?