Rome,CPA,is examining the internal control of Smack,Inc.Rome has established a risk of overreliance of 10%,an expected population deviation rate of 1%,and a tolerable rate of deviation of 5%. What is the appropriate sample size that would be examined by Rome?
A) 46
B) 38
C) 77
D) 93

Question

Quizplus · Accepted Answer

To calculate the appropriate sample size, we use the formula: 
n = [(Z-score)^2 * p * (1-p)] / [(Marginal error)^2]

Where: 
Z-score = the value obtained from a standard normal distribution table for the risk of overreliance (10%)
p = expected population deviation rate (1%)
(1-p) = non-deviation rate (99%)
Marginal error = tolerable rate of deviation (5%)

Substituting the values:
n = [(1.28)^2 * 0.01 * 0.99] / [(0.05)^2]
n = 76.98, which we round up to 77.

Therefore, the appropriate sample size that would be examined by Rome is 77.

Rome,CPA,is Examining the Internal Control of Smack,Inc