Internal Control Processes in an Organization Require That All Investments

question 330

Multiple Choice

Internal control processes in an organization require that all investments exceeding $20, 000 receive authorization from both the president and treasurer. After conducting a sample of these transactions, an auditor determined that 10 of the 500 investments in the sample had not included both required authorizations. The sample has a five percent acceptable error rate. Based on this sample, which of the following actions should the auditor take?

• A) Confirm all of the investments with the organization's internal finance department.
• B) Contact the organization's investment broker and confirm all investments.
• C) Complete a comprehensive review of the organization's investment activity and compare variations over prior years.
• D) Determine that no further testing of investment authorizations is required.

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Definitions:

Perfect Prediction

A situation where a model or analysis predicts the outcome with 100% accuracy, with no errors.

Regression Equation

An equation that describes the line of best fit through a dataset, used to predict the outcome variable.

Regression Line

A line of best fit through a dataset, used to predict the value of a dependent variable based on the value of an independent variable.

Standard Error

An estimate of the standard deviation of a sampling distribution, often used in inferential statistics.