Explain the stages in the life cycle of a long-term operational asset.

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Chapter 8, Problem 11Q

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Explain the stages in the life cycle of a long-term operational asset.

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You have been asked to test the effectiveness of Ingo Corporation’s control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 4 percent (although she expects the rate to be only approximately 0.50 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed level of control risk and the assessed level of control risk. (Planned) Assessed Level of Control Risk Tolerable Deviation Rate Low 2−7% Moderate 6−12% Slightly below the maximum 11−20% Maximum Over 20% Expected Population Deviation Rate (as Percentages) Tolerable Deviation Rate 2% 3% 4% 5% 6% 7% 8% 9% 10% 15% 20% 0.00% 149(0) 99(0) 74(0) 59(0) 49(0) 42(0) 36(0) 32(0) 29(0) 19(0) 14(0) 0.25 236(1) 157(1) 117(1) 93(1) 78(1) 66(1) 58(1) 51(1) 46(1) 30(1) 22(1) 0.50 * 157(1)…

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