In Audit Sampling, an Advance Estimate of the Deviation Rate

question 10

Multiple Choice

In audit sampling, an advance estimate of the deviation rate is necessary to plan the appropriate sample size. The relationship of estimated population deviation rate (EPDR) to sample size is:

• A) indeterminate.
• B) direct (small EPDR = small sample).
• C) inverse (small EPDR = large sample).
• D) a variable (sometimes small, sometimes large) dependent on other factors present.

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Definitions:

Taxes

Compulsory financial charges or other types of levies imposed upon a taxpayer by a governmental organization in order to fund various public expenditures.

Lump Sum Tax

A type of tax that is a fixed amount, no matter the change in circumstance of the taxed entity.

Horizontal Equity

The idea that taxpayers with similar abilities to pay taxes should pay the same amount

Average Tax Rate

The proportion of total income that is paid as tax.