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You have been asked to test the effectiveness of Ingo Corporation's control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 5 percent (although she expects the rate to be only approximately 0.50 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed level of control risk and the assessed level of control risk. (Planned) Assessed Level of Control Risk Low Moderate Slightly below the maximum Maximum a. What is the planned assessed level of control risk? O Low Moderate Slightly below the maximum Maximum Tolerable Deviation Rate 2-7% 6-12% 11-20% Over 20% b. Determine the appropriate sample size and allowable number of deviations using Figure 9.4.

You have been asked to test the effectiveness of Ingo Corporation's control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 5 percent (although she expects the rate to be only approximately 0.50 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed level of control risk and the assessed level of control risk. (Planned) Assessed Level of Control Risk Low Moderate Slightly below the maximum Maximum a. What is the planned assessed level of control risk? O Low Moderate Slightly below the maximum Maximum Tolerable Deviation Rate 2-7% 6-12% 11-20% Over 20% b. Determine the appropriate sample size and allowable number of deviations using Figure 9.4.

Auditing: A Risk Based-Approach (MindTap Course List)
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter8: Specialized Audit Tools: Attributes Sampling, Monetary Unit Sampling, And Data Analytics Tools
Section: Chapter Questions
Problem 30RQSC
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You have been asked to test the effectiveness of Ingo Corporation's control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 5 percent (although she expects the rate to be only approximately 0.50 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed level of control risk and the assessed level of control risk. (Planned) Assessed Level of Control Risk Low Moderate Slightly below the maximum Maximum a. What is the planned assessed level of control risk? Low Moderate Slightly below the maximum Maximum b. Determine the appropriate sample size and allowable number of deviations using Figure 9.4. Sample size Allowable number of deviations Tolerable Deviation Rate 2-7% 6-12% 11-20% Over 20% 153 items 3
Transcribed Image Text:You have been asked to test the effectiveness of Ingo Corporation's control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 5 percent (although she expects the rate to be only approximately 0.50 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed level of control risk and the assessed level of control risk. (Planned) Assessed Level of Control Risk Low Moderate Slightly below the maximum Maximum a. What is the planned assessed level of control risk? Low Moderate Slightly below the maximum Maximum b. Determine the appropriate sample size and allowable number of deviations using Figure 9.4. Sample size Allowable number of deviations Tolerable Deviation Rate 2-7% 6-12% 11-20% Over 20% 153 items 3
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