Auditor ABC audits Company XYZ's financial statements and its internal control over financial reporting. Auditor ABC uses attribute sampling to evaluate Company XYZ's warehouse physical controls. Specifically, Auditor ABC checks whether the warehouse security cameras are working properly. The auditor decides the tolerable error rate to be 5%, and sampling risk is 5%. In the past five years, the failure rate of XYZ's security camera is 0.00%. 1. Based on the information above, what is the confidence level, and what is the minimum number of items to pick from the population? (6 pts) 2. If the auditor decides to decrease the sampling risk from 5% to 1%, how will sample size change? Please answer A. Increase, B. Decrease, or C. No Change. (4 pts) Tolerable Error Rate Tolerable Error Rate Expected Error Rate 5% 6% 7% 0.00% 59 49 42 0.25% 93 78 66 13 Expected Error Rate 5% 6% 7% 0.00% 45 38 32 0.25% 77 64 55 0.50% 93 78 66 0.50% 77 64 55 0.75% 93 78 66 0.75% 77 64 55 55 1.00% 93 78 66 1.00% 77 64 55 1.25% 124 78 66 1.25% 77 64 55 Confidence Level: 95% Confidence Level: 90%

Auditor ABC audits Company XYZ's financial statements and its internal control over financial reporting. Auditor ABC uses attribute sampling to evaluate Company XYZ's warehouse physical controls. Specifically, Auditor ABC checks whether the warehouse security cameras are working properly. The auditor decides the tolerable error rate to be 5%, and sampling risk is 5%. In the past five years, the failure rate of XYZ's security camera is 0.00%. 1. Based on the information above, what is the confidence level, and what is the minimum number of items to pick from the population? (6 pts) 2. If the auditor decides to decrease the sampling risk from 5% to 1%, how will sample size change? Please answer A. Increase, B. Decrease, or C. No Change. (4 pts) Tolerable Error Rate Tolerable Error Rate Expected Error Rate 5% 6% 7% 0.00% 59 49 42 0.25% 93 78 66 13 Expected Error Rate 5% 6% 7% 0.00% 45 38 32 0.25% 77 64 55 0.50% 93 78 66 0.50% 77 64 55 0.75% 93 78 66 0.75% 77 64 55 55 1.00% 93 78 66 1.00% 77 64 55 1.25% 124 78 66 1.25% 77 64 55 Confidence Level: 95% Confidence Level: 90%

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 35RQSC

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