An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a statistical sample that would provide 1 percent risk of assessing control risk too low for the assertion that not more than percent of the sales invoices lacked approval. The auditor estimated from previous experience that about 2 percent 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 computed upper deviation rate to be(8 percent. In the evaluation of this sample, the auditor decided to increase the level of the preliminary assessment of control risk because the: Multiple Choice O expected population deviation rate (7 percent) was more than the percentage of errors in the sample (3½ percent). expected population deviation rate (2½ percent) was less than the tolerable deviation rate (7 percent). tolerable deviation rate (7 percent) was less than the computed upper deviation rate (8 percent). computed upper deviation rate (8 percent) was more than the percentage of errors in the sample (3½ percent). 3.5

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
An auditor desired to test credit approval on 10,000 sales invoices processed during the year.
The auditor designed a statistical sample that would provide 1 percent risk of assessing control
risk too low for the assertion that not more than percent of the sales invoices lacked approval.
The auditor estimated from previous experience that about 22 percent 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 computed upper deviation rate to be 8 percent.
In the evaluation of this sample, the auditor decided to increase the level of the preliminary
assessment of control risk because the:
Multiple Choice
O
expected population deviation rate (7 percent) was more than the
percentage of errors in the sample (3½ percent).
expected population deviation rate (2½ percent) was less than the
tolerable deviation rate (7 percent).
tolerable deviation rate (7 percent) was less than the computed upper
deviation rate (8 percent).
computed upper deviation rate (8 percent) was more than the percentage
of errors in the sample (3½ percent).
3.5+
Transcribed Image Text:An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a statistical sample that would provide 1 percent risk of assessing control risk too low for the assertion that not more than percent of the sales invoices lacked approval. The auditor estimated from previous experience that about 22 percent 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 computed upper deviation rate to be 8 percent. In the evaluation of this sample, the auditor decided to increase the level of the preliminary assessment of control risk because the: Multiple Choice O expected population deviation rate (7 percent) was more than the percentage of errors in the sample (3½ percent). expected population deviation rate (2½ percent) was less than the tolerable deviation rate (7 percent). tolerable deviation rate (7 percent) was less than the computed upper deviation rate (8 percent). computed upper deviation rate (8 percent) was more than the percentage of errors in the sample (3½ percent). 3.5+
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
External Confirmations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education