The upper limit rate of deviation - the sample rate of deviation =
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1. Rome, CPA, is examining the internal control of Smack, Inc. Rome has established a risk of overreliance of 10%, an expected population Show Assume that a sample of 100 items was examined and 5 deviations were noted. What is the upper limit rate
of deviation? 2. The auditor’s sample size increases proportionally with increases in the size of the population. 3. The expected population deviation rate is determined by the auditor based on either prior audit experience or a pilot sample from the
current 4. Unrestricted A. Yes Yes B. Yes No C. No Yes D. No No
Unrestricted Yes No 5. In audit sampling applications, sampling risk is The probability that an audit team’s conclusion based on a sample might be different from the conclusion based on an audit of the entire population. 6. Attributes sampling is most closely associated with the auditor's substantive procedures. 7. When verifying the completeness assertion for sales transactions, the auditor would define the population as a shipping document for 8. Rome, CPA, is examining the internal control of Smack, Inc. Rome has established a risk of overreliance of 10%, an expected population What is the appropriate sample size that would be examined by Rome? 9. If the upper limit rate of deviation exceeds the tolerable rate of deviation, the auditor
may decide to increase the assessment of control risk. 10. The audit team will choose to reduce the reliance on controls if the_____ is greater than the_____ Upper limit rate of deviation; tolerable rate of deviation. 11. The upper limit rate of deviation is equal to the sample rate of deviation minus the allowance for sampling risk. 12. As the risk of
overreliance decreases, the upper limit rate of deviation increases, holding all other factors constant. 13. Rome, CPA, is examining the internal control of Smack, Inc. Rome has established a risk of overreliance of 10%, an expected population Assume that a sample of 100 items was examined and 5 deviations were noted.
What is the allowance for sampling risk? 14. Which of the following pairs of selection methods could appropriately be used in statistical sampling applications? Unrestricted random selection, systematic random selection. 15. There is a 90 percent likelihood that the average weight of a student in the class is between 110 and 130 pounds. 16. Which of the following is not true with respect to the risk of overreliance? All of the above are true with respect to the risk of overreliance. 17. The tolerable rate of deviation has an inverse relationship with control risk; that is, as the acceptable level of control risk decreases, the 18. Which of the following steps in the attributes sampling process would ordinarily be performed last? Evaluating sample results. 19. Which of the following factors is not assessed based on the acceptable level of control risk? Expected population deviation rate. 20. The sample rate of deviation is determined by dividing the number of deviations by the size of the population. 21. To measure sample items in an attributes sampling application, the auditor performs the appropriate test of controls. 22. Which of the following statements is not true if the precision interval for a sampling risk of 10 percent ranges from 60 to 70? A 90 percent probability exists that the true population value is less than 60 or more than 70. 23. If the
tolerable rate of deviation is 6 percent, the acceptable risk of overreliance is 5 percent, and the upper limit rate of deviation is 4.8 percent, which of the following statements is not true? The auditor would initially conclude that the internal control is not functioning as intended. 24. After defining the deviation condition, the auditor would next identify the key controls to
examine. 25. If systematic selection is used with a starting point of 10, a population size of 100, and a necessary sample size of 20, the first three items selected for examination would be 26. Performing the appropriate audit procedure. 27. An important control for sales on account is that all sales invoices are mathematically verified by the client. Which of the following would be 28. Which of the following would
not be a situation in which the auditor would apply attributes sampling? Performing price tests for items listed on the client's year-end inventory. 29. The expected population deviation rate has an inverse relationship with sample size. 30A. Mike Smith is studying the internal control of Pooh Company. Mike has identified client
verification of sales invoices as an important control Risk of overreliance 5% a. What is the appropriate sample size? 30B. Ignore your answer from (a) above. Assume that Mike Smith examined a sample of 80 items and found 2 deviations. Calculate the following measures: (Round your answers to 1 decimal place.) Risk of overreliance 5% Sample rate of deviation Sample rate of deviation 2.5% C) Not functioning effectively 31. The risk of overreliance exposes the auditor to an effectiveness loss. 32. Which of the following factors does not impact the sample size in an attributes sampling application? Sample rate of deviation. 33. Discovery sampling is ordinarily used when deviations from control activities occur at a relatively low rate and are extremely important in the audit examination. 34. An advantage of statistical sampling over nonstatistical sampling methods is that statistical methods Provide an objective basis for quantitatively evaluating sampling risk. 35. When using sampling in the study of internal control, the audit team would compare the upper limit rate Tolerable rate of deviation. 36. Lower levels of control risk are typically associated with lower levels of the risk of overreliance. 37. When the upper
limit rate of deviation exceeds the tolerable rate of deviation, auditors may be exposed to the risk of underreliance. 38. In addition to the quantitative measure of deviations, the auditor should also consider qualitative measures, such as the pervasiveness and source of the deviations. 39. Which of the following
statements is not true with respect to nonstatistical sampling? It cannot be used in an audit conducted in accordance with generally accepted auditing standards. 40. A limitation of systematic random selection is that this method Can result in bypassing a number of items having similar characteristics. When the upper limit rate of deviation is higher than the tolerable rate of deviation?If the tolerable deviation rate exceeds the actual deviation rate, then that means that the audit team can accept the test and rely on the internal control. If the actual deviation rate exceeds the tolerable deviation rate, then the audit team cannot rely on the internal control.
What is sample deviation rate?April 25, 2022. The tolerable deviation rate is the largest percentage variance experienced in audit sampling that an auditor will accept in order to rely upon a specific control. If the deviation rate is higher than this threshold value, then the auditor cannot rely upon the control.
What is tolerable rate of deviation in audit?(j) Tolerable rate of deviation – A rate of deviation from prescribed internal control procedures set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation in the population. 9.
What is expected population deviation rate?Expected population deviation rate. The expected population deviation rate is established based on the auditor's prior experience with the client (in a recurring engagement) or a pilot sample of controls (in a first-year engagement).
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