An Auditor Who Uses Statistical Sampling for Attributes in Testing

question 42

Multiple Choice

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the:

• A)Sample rate of deviation plus the allowance for sampling risk equals the tolerable rate of deviation.
• B)Sample rate of deviation is less than the expected rate of deviation used in planning the sample.
• C)Tolerable rate less the allowance for sampling risk exceeds the sample rate of deviation.
• D)Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation.

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Definitions:

Process Cost System

An accounting method used to track costs associated with producing homogenous products in continuous processes.

Work In Process

Inventory that includes goods in the production process but not yet completed, often referred to as WIP.

Conversion Costs

The combined costs of direct labor and overhead that are incurred to convert raw materials into finished products.

Raw Steel

The unprocessed product from melting iron ore, scrap steel, and other additives in a blast furnace, which is the base material for making steel products.