In Testing Controls Over Invoices an Auditor Discovers That in 10

question 47

Multiple Choice

In testing controls over invoices an auditor discovers that in 10% of her statistical sample invoices were sent for full shipments, even if shipping documents suggested partial shipments.In this case, she would likely:

• A)Increase her sample size to determine the extent of the control weakness.
• B)Recalculate control risk to determine if there is any effect on the nature, timing or extent of her yearend procedures.
• C)Conclude that controls are working at 90% effectiveness and classify control risk as low.
• D)Consult with her partner to consider launching a fraud investigation.

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Definitions:

Negatively Correlated

A relationship between two variables in which one variable increases as the other decreases.

Expected Value

A calculation in statistics that quantifies the average outcome of a random event over a large number of occurrences.

Mean

The average value of a set of numbers, calculated by dividing the sum of all values by the number of values.

Risk Aversion

A preference for safer investments, avoiding risk even at the expense of lower potential returns.