Using AICPA sample evaluation tables,what is the conclusion from a statistical sample of internal controls when a sample of 125 documents indicates five deviations if the tolerable rate of deviation is 5 percent,the expected population deviation rate is 2 percent,and the allowance for sampling risk is 3 percent?
A) Accept the evidence as support for assessing a low control risk because the tolerable rate of deviation less the allowance for sampling risk is less than the expected population deviation rate.
B) Use the evidence to assess a higher control risk than planned because the sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation.
C) Use the evidence to assess a higher control risk than planned because tolerable rate of deviation plus the allowance for sampling risk exceeds the expected population deviation rate.
D) Accept the evidence as support for assessing a low control risk because the sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation.

Question

Quizplus · Accepted Answer

To determine the conclusion from the statistical sample of internal controls, we need to compare the sample rate of deviation (divisions in the sample) to the tolerable rate of deviation (max deviations allowed), taking into account the expected population deviation rate (deviation rate expected in the population) and the allowance for sampling risk (margin of error). If the sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation, we have evidence that control risk is higher than planned. In this case, the sample rate of deviation is 4% (5 deviations out of 125 documents), which added to the allowance for sampling risk of 3% is 7%, exceeding the tolerable rate of deviation of 5%. Therefore, we should use the evidence to assess a higher control risk than planned (choice B).

Using AICPA Sample Evaluation Tables,what Is the Conclusion from a Statistical