The Audit Team Is Planning to Examine a Sample of Control

question 81

Multiple Choice

The audit team is planning to examine a sample of control policies and procedures.Assume that,based on the intended degree of reliance on internal control,the audit team wishes to control the risk of overreliance to 5% and establishes a tolerable deviation rate of 8%.Based on past audits,the audit team would normally estimate the expected population deviation rate at 2%; however,because of improvements in the client's internal control,they now feel that a rate of 1.25% is appropriate.Which of the following is not true with respect to the impact of the reduction in the expected population deviation rate on sample size?

• A)The reduction in the expected population deviation rate would result in a smaller sample size.
• B)The audit team would likely need to have a reasonable justification for establishing a lower expected population deviation rate.
• C)The resultant sample size assuming the reduction in the expected population deviation rate would be 77 items.
• D)The reduction in the expected population deviation rate would result in the audit team examining 19 fewer items.

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Definitions:

Open Road

Sometimes used metaphorically to refer to freedom or the lack of obstacles for actions or endeavors.

Market-Share Liability

A theory under which liability is shared among all firms that manufactured and distributed a particular product during a certain period of time. This theory of liability is used only when the specific source of the harmful product is unidentifiable.

Toxic Chemical

A substance that poses a risk to health or the environment due to its poisonous properties.

Water Supply

The provision and management of water resources for various uses, including domestic, agricultural, and industrial purposes.