If an Auditor Is Evaluating a Sample for a Test

question 42

Multiple Choice

If an auditor is evaluating a sample for a test of controls of 50 items and specifies a risk of assessing control risk too low of 10 per cent and finds two deviations, the approximate maximum deviation rate (rounded to the nearest one per cent) is: (Use the following table to determine your answer.)
Number of factors for sampling risks of:

• A) 10 per cent.
• B) six per cent.
• C) 11 per cent.
• D) four per cent.

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Definitions:

Expected Cash Flows

Forecasted cash receipts and payments over a specified period, often used for investment appraisal.

Rate of Return

The profit or deficit experienced from an investment during a set timeframe, represented as a percent growth from the initial investment value.

Capital Budgeting

The process of planning and managing a firm's long-term investments in projects and assets, considering their potential returns and risks.

Long-Term Commitment

Refers to obligations or investments that a company plans to hold or is expected to fulfill over an extended period, typically beyond one year.