Question: Tolerable Deviation Rate (allowable number of deviations) Expected Population Deviation Rate (As Percentages) 2% 3% 4% 5% 6% 7% 8% 9% 0.00% 149(0) 99(0) 74(0)
| Tolerable Deviation Rate (allowable number of deviations) | ||||||||
| Expected Population Deviation Rate (As Percentages) | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% |
| 0.00% | 149(0) | 99(0) | 74(0) | 59(0) | 49(0) | 42(0) | 36(0) | 32(0) |
| 0.25% | 236(1) | 157(1) | 117(1) | 93(1) | 78(1) | 66(1) | 58(10 | 51(1) |
| 0.50% | * | 157(1) | 117(1) | 93(1) | 78(1) | 66(1) | 58(11 | 51(1) |
| 0.75% | * | 208(2) | 117(1) | 93(1) | 78(1) | 66(1) | 58(12 | 51(1) |
| 1.00% | * | * | 156(2) | 93(1) | 78(1) | 66(1) | 58(13 | 51(1) |
| 1.25% | * | * | 156(2) | 124(2) | 78(1) | 66(1) | 58(14 | 51(1) |
| 1.50% | * | * | 192(3) | 124(2) | 103(2) | 66(1) | 58(15 | 51(1) |
| 1.75% | * | * | 227(4) | 153(3) | 103(2) | 88(2) | 77(2) | 51(1) |
| 2.00% | * | * | * | 181(4) | 127(3) | 88(2) | 77(2) | 68(2) |
| 2.25% | * | * | * | 208(5) | 127(3) | 88(2) | 77(2) | 68(2) |
| 2.50% | * | * | * | * | 150(4) | 109(3) | 77(2) | 68(2) |
| 2.75% | * | * | * | * | 173(5) | 109(3) | 95(3) | 68(2) |
| 3.00% | * | * | * | * | 195(6) | 129(4) | 95(3) | 84(3) |
| 3.25% | * | * | * | * | * | 148(5) | 112(4) | 84(3) |
You are auditing revenues and receivables for ABC Corporation. ABC requires that all credit sales go through a credit approval before goods are shipped. All credit sales go through an automated approval as long as they are for $10,000 and below. Anything above $10,000 requires a manual credit check which is done by the credit manager, who then puts his signature on the sale documents. You wish to test to test the effectiveness of ABCs control of manually approving all credit requests over $10,000. During the year ABC has made 15,000 purchases, of which 3,000 were over $10,000. You have established a tolerable deviation rate of 5% and your expected deviation rate is 2%
1a. What is your sample size? (use the sampling table provided in chapter 8 slides - 2. 1 slide 9)
1b. What is the maximum number of deviations allowed? (Please show work for credit)
1c. After selecting your sample and performing your audit test you find 5 deviations.
What is your conclusion?
A. The control is effective
B. Credit sales are materially misstated
C. The control is not effective
D. There is no material misstatement
1.d What impact does this have on your further testing?
A. Increase sample size
B. Increase substantive testing
C. Quit the audit
D. Reduce substantive testing
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