Audit Sampling in Tests of Control Activities
A. Define “audit sampling.”
B. Which word properly completes each of the following statements
1. Decreasing the risk of assessing control risk too low from 10% to 5%
will cause the sample size to: Increase ___ Decrease ____
2. Decreasing the tolerable deviation rate from 5% to 4% will cause the
sample size to: Increase ___ Decrease ______
3. Decreasing the expected population deviation rate from 1% to 0.5%
will cause the sample size to: Increase ___ Decrease _____
C. The following items have been recorded in the internal auditor’s working papers:
Invoice Number Prescribed Control Finding
1472 Credit department authorization Evidence of credit department
of credit approval of invoice.
Amount of invoice exceeds
maximum credit limit.
1545 Shipping department verification No evidence of shipping department
of agreement of goods verification but invoice agrees
shipped with sales order. with sales order.
1719 Credit department Name of authorizer not included on
authorization of credit. approved signature list.
Auditor investigation disclosed a
new hire in credit whose name
was inadvertently omitted from
the authorized list of signers.
Indicate for each invoice number whether it represents a deviation from the prescribed
control activity. Briefly explain the reason for each answer.
D. The following information concerning one of the prescribed control activities has been
Estimated number of transactions per year 5000
Risk of assessing control risk to low 5%
Tolerable deviation rate 4%
Expected population deviation rate 0.5%
Sample size per table 117
Sample size used 125
Number of deviations found 2
Sample deviation rate 1.6%
Upper deviation limit 4.9%
Allowance for sampling risk 3.3%
Evaluate the sample results. Your answer should include:
1. A statistical conclusion, and
2. The audit decision you would make based on the quantitative sample results. Be sure to
include the reason for this decision
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