An Auditor Planning Tests of Controls Specifies a Risk of Assessing

question 34

Multiple Choice

An auditor planning tests of controls specifies a risk of assessing control risk too low of 10 per cent and a tolerable deviation rate of six per cent and expects no deviations. For these specifications, the planned sample size should be: (Use the following table to determine your answer.)
Number of factors for sampling risks of:

• A) 60.
• B) 50.
• C) 40.
• D) Some other amount.

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Definitions:

Cash-Basis Accounting

Accounting basis in which companies record revenue when they receive cash and an expense when they pay out cash.

Revenue Recognition Principle

An accounting principle stating that revenue should be recorded when it is earned and realizable, regardless of when the cash is received.

Expense Recognition Principle

An accounting principle that states expenses should be recognized and recorded when they are incurred, regardless of the timing of cash payments.

Financial Statements

Papers that give a summary of a corporation's financial status, featuring the balance sheet, income statement, and statement of cash flows.