4) The audit team is planning to examine a sample of control policies and procedures. Assume that, based on the intended degree of reliance on internal control, the audit team wishes to control the risk of overreliance to 5%. In addition, based on prior engagements, the audit team anticipates an expected deviation rate of 2%. What would be the impact of reducing the tolerable rate of deviation from 7% to 5% on the sample size?

Multiple Choice

• Increase sample size by 93 items.

• Increase sample size by 181 items.

• Decrease sample size by 93 items.

• Decrease sample size by 181 items.

2) While selecting a sample of sales invoices for a test of internal controls, the auditor was unable to locate one invoice and classified this invoice as non-deviation. This is an example of

Multiple Choice

• nonsampling risk.

• deviation risk.

• sampling risk.

• incorrect acceptance.

5) An erroneous decision to assess control risk at excessively high levels can have an adverse effect on:

Multiple Choice

• the validity of an audit.

• the efficiency of an audit engagement.

• the type of report the auditor decides to render.

• the effectiveness of an audit engagement.