An Auditor Who Uses Statistical Sampling for Attributes in Testing

question 74

Multiple Choice

An auditor who uses statistical sampling for attributes in testing internal controls should increase the assessed level of control risk when the

• A)sample rate of exceptions is less than the expected rate of exception used in planning the sample.
• B)tolerable exception rate less the allowance for sampling risk exceeds the sample rate of deviation.
• C)sample rate of exceptions plus the allowance for sampling risk exceeds the tolerable exception rate.
• D)sample rate of exceptions plus the allowance for sampling risk equals the tolerable exception rate.

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Definitions:

Normal Balance

The side (debit or credit) of an account that increases its balance, reflecting the account's role in the accounting equation.

Financial Statement

A formal record of the financial activities and position of a business, individual, or other entity, detailing assets, liabilities, revenue, and expenses over a specific period.

Permanent/Temporary

Used to classify accounts, with permanent accounts being those that carry their balances over into the next fiscal year, and temporary accounts being closed at the end of the fiscal year.

Normal Balance

The typical or usual balance of an account, which can be a debit for asset and expense accounts, or a credit for liability, equity, and revenue accounts.