An Auditor Who Uses Statistical Sampling for Attributes in Testing

question 45

Multiple Choice

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the:

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

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing the ownership interest of the stockholders.

Income Statement

A financial statement that shows a company’s revenue and expenses over a specific period, determining its profit or loss.

Expense Accounts

Accounts used in accounting to track the consumption of economic resources or the incurrence of liabilities in the operation of a company.

Credits

Entries made on the right-hand side of an account, representing gains or increases in liabilities, income, or equity.