An Auditor Who Uses Statistical Sampling for Attributes in Testing

question 45

Multiple Choice

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

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

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Definitions:

Barriers to Entry

Barriers to entry are obstacles that make it difficult for new competitors to enter a market, including high initial costs, licensing requirements, and strong brand loyalty among consumers.

Competitive Price-searcher

A market structure where firms set their prices and output levels to compete for consumers in a market with many sellers and product differentiation.

Long-run Equilibrium

A state in which all aspects of the market, including supply, demand, and price, are stabilized over time, allowing for full adjustment to any economic changes.

MR = MC

This equation represents the profit-maximizing condition in economics where marginal revenue (MR) equals marginal cost (MC), often used to determine the optimal level of output.