8 31 Iceberges conclusion on each item would be as follows 1 The sample

8 31 iceberges conclusion on each item would be as

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8-31 Iceberge’s conclusion on each item would be as follows: 1. The sample deviation rate is 2.0% (1 ÷ 50). Since the sample deviation rate is less than the expected population deviation rate of 3%, the control can be relied upon. 2. The sample deviation rate is 4.0% (2 ÷ 50). Since the sample deviation rate exceeds the expected population deviation rate of 3%, the control cannot be relied upon. Solution to Discussion Case 8-32 The following are the incorrect assumptions and statements and inappropriate applications of attribute sampling in Baker’s procedures: Statistical sampling does not eliminate the need for professional judgment. The computed upper deviation rate is too high (20%) if Baker plans to assess control risk at a low level. The increase in the population size has little or no effect on determining sample size. Baker failed to consider the risk of assessing control risk too low in determining the sample size. The population from which the sample was chosen (invoices) was an incorrect population. The sample was not randomly selected. Baker failed to consider the difference of an immaterial amount to be an error. The allowance for sampling risk was incorrectly calculated. Baker’s reasoning concerning the decision that the sample supported a low assessed level of control risk was erroneous. 8-9
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  • Spring '10
  • evans
  • deviation rate

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