Part 4 Statistical Sampling

I. In sampling for attributes (i.e. test of controls) the determination of sample size is a function of (1) risk of assessing control risk too low (Sampling Risk), (2) tolerable rate and, (3) estimated population deviation rate. Fill in the spaces to indicate if the items have a direct or indirect effect on sample size.

Direct or Indirect effect

1. Risk of assessing control risk too low (Sampling risk). ____________

2. Tolerable Deviation Rate. ____________

3. Estimated population deviation rate ____________

II. (A) Based on the following information determine sample size

Risk of assessing control risk too low (Sampling risk) 10%

Tolerable Deviation Rate 6%

Expected population deviation rate 2%

(B) Regardless of your answer to (A), assume that you selected a sample size of 100, and determined that there were three errors (deviations) in the sample. Risk of Assessing Control Risk too low (i.e. Risk of Overreliance; Sampling Risk) is 10%. Evaluate the sample results to conclude whether controls are acceptable. Show your work!

Controls are acceptable

(indicate either YES or NO) ____

Explain your conclusion (i.e. Show work)