Using AICPA Sample Evaluation Tables,what Is the Conclusion from a Statistical

question 130

Multiple Choice

Using AICPA sample evaluation tables,what is the conclusion from a statistical sample of internal controls when a sample of 125 documents indicates five deviations if the tolerable rate of deviation is 5 percent,the expected population deviation rate is 2 percent,and the allowance for sampling risk is 3 percent?

• A) Accept the evidence as support for assessing a low control risk because the tolerable rate of deviation less the allowance for sampling risk is less than the expected population deviation rate.
• B) Use the evidence to assess a higher control risk than planned because the sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation.
• C) Use the evidence to assess a higher control risk than planned because tolerable rate of deviation plus the allowance for sampling risk exceeds the expected population deviation rate.
• D) Accept the evidence as support for assessing a low control risk because the sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation.

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Definitions:

Operations

entails the daily activities, processes, and functions carried out in running a business, particularly related to production of goods or services.

Return on Investment

A measure of the profitability of an investment, calculated by dividing the gain from the investment by its cost.

Cost Centre Managers

Individuals responsible for managing a department or unit within an organization that does not directly add to profit but incurs costs.

Variance Analysis

The process of investigating the difference between planned financial outcomes and actual financial performance.