[AMERICANDREAM]

An auditor uses an attribute sampling plan to determine whether large expenditures are being properly approved. The auditor is willing to accept a 2% risk of assessing control risk too low, and has a tolerable rate of 5%. A sample of 100 invoices is selected, and only one is found to be lacking appropriate approval. One invoice selected by the auditor cannot be located. Which statement is true?

– There is not enough information given to determine whether the auditor should rely on this control. –> Correct
– Since the sample deviation rate is less than the tolerable rate, the auditor should rely on this control

I chose the second option. Although I was not satisfied with the word “sample deviation rate” rather than “upper deviation rate”, I thought it came closest to my choice.

The way I calculated this problem was:
– only 1/100 invoices lacked approval –> 1% sample deviation rate
– “willing to accept 2% risk of assessing control risk too low” –> 2% allowance for sampling risk
– the above two, 1+2 = 3% upper deviation rate.
– 3 is less than 5 ( the tolerable rate) = reliable control.

What am I missing here?

[Anonymous]

2 samples failed – 1 had no approval and 1 was missing entirely.

Since one was missing entirely, its more than just missing approval. It fails the existence test, the approval test (which is the control being tested), and it requires further follow up. I wouldn't just mark it is part of the deviation rate. If a large expenditure of cash walked out the door with no documentation, that's possible theft. I would need more information.

[AMERICANDREAM]

Thanks

[Author]

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