An Auditor Wanted to Test Credit Approval on 10,000 Sales

question 83

Multiple Choice

An auditor wanted to test credit approval on 10,000 sales invoices processed during the year.The auditor designed a statistical sample that would provide a 1% risk of overreliance (99% confidence) that not more than 7% of the sales invoices lacked approval.The auditor estimated from previous experience that about 2½% of the sales invoices lacked approval.A sample of 200 invoices was examined,and 7 of them were lacking approval.The auditor then determined the upper limit rate of deviation to be 8%. In the evaluation of this sample,the auditor decided to increase the level of the preliminary assessment of control risk because the

• A) Tolerable rate of deviation (7%) was less than the upper limit rate of deviation (8%).
• B) Expected population deviation rate (7%) was more than the percentage of errors in the sample (3½%).
• C) Expected population deviation rate (2½%) was less than the tolerable rate of deviation.
• D) Upper limit rate of deviation (8%) was more than the percentage of errors in the sample (3½%).

Understand the expectancy theory of motivation and its components.

Apply key financial metrics to evaluate the profitability and efficiency of investment centers.

Understand the concept of invested capital and its different definitions.

Recognize the impact of employee perceptions of their achievements on motivation.

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Definitions:

Charismatic Leader

A leadership style characterized by the ability to inspire and motivate followers due to the leader's charm and persuasive skills.

Expressive Communication

A form of communication where the main purpose is to express one's feelings or emotions rather than to convey information.

Participative

A leadership or decision-making style characterized by involving employees or members in the process, promoting engagement and input.

Adaptive

The ability or tendency to adjust or change in response to new conditions, challenges, or environments, often considered a key trait for survival and success.