Sampling for attributes is often used to allow an auditor to reach a conclusion concerning a rate of occurrence in a population. A common use in auditing is to test the rate of deviation from a prescribed internal control procedure to determine whether the planned assessed level of control risk is appropriate.

Required:

A. When an auditor samples for attributes, identify the factors that should influence the auditor's judgment concerning the determination of:

1 acceptable level of risk of assessing control risk too low,

2 tolerable deviation rate, and

3 expected population deviation rate.

B. State the effect on sample size of an increase in each of the following factors, assuming all other factors are held constant:

1 acceptable level of risk of assessing control risk too low,

2 tolerable deviation rate, and

3 expected population deviation rate.

C. Evaluate the sample results of a test for attributes if authorizations are found to be missing on seven check requests out of a sample of 100 tested. The population consists of 2,500 check requests, the tolerable deviation rate is 8 percent, and the acceptable level of risk of assessing control risk too low is considered to be low.

D. How may the use of statistical sampling assist the auditor in evaluating the sample results described in C above?
[Adapted and reprinted with permission from AICPA. Copyright © 2000 & 1985 by American Institute of Certified Public Accountants]