Question

What is an auditor's evaluation of a statistical sample for attributes when a test of 50 documents results in three deviations if the tolerable deviation rate is 7 percent, the expected population deviation rate is 5 percent, and the allowance for sampling risk is 2 percent?

1) The planned assessed level of control risk should be modified because the tolerable deviation rate plus the allowance for sampling risk exceeds the expected population deviation rate.
2) The sample results should be accepted as support for the planned assessed level of control risk because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.
3) The sample results should be accepted as support for the planned assessed level of control risk because the tolerable deviation rate less the allowance for sampling risk equals the expected population deviation rate.
4) The planned assessed level of control risk should be modified because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.

Answer 1

The planned assessed level of control risk should be modified because the tolerable deviation rate plus the allowance for sampling risk exceeds the expected population deviation rate.

Step-by-step explanation:

The correct option is 1) The planned assessed level of control risk should be modified because the tolerable deviation rate plus the allowance for sampling risk exceeds the expected population deviation rate.

In this scenario, the tolerable deviation rate is 7 percent and the allowance for sampling risk is 2 percent, which gives a total of 9 percent. This value is higher than the expected population deviation rate of 5 percent. Therefore, the planned assessed level of control risk should be modified.