Attribute Sampling Problem - Answers | Appalachian State University

University:
Appalachian State University
Course:
FIN 5500 | Independent Study
Academic year:

2025
Views:

258

Pages:

5
Author:

Dasha Urupa

Attribute Sampling Problem - Answers Control: All purchase orders are signed for approval by purchasing manager prior to ordering goods. Confidence Level – 95% Tolerable Deviation Rate – 7% Expected Population Deviation Rate – 2% What is a deviation? What is our sampling population? What is the sampling unit? What is the sample size? 88 You found 1 deviation during your testing. W hat is the Sample Rate of Deviation ? What is the Upper Limit Rate of Deviation ? The Upper Limit Rate of Deviation (ULRD) is 5.8%. Conservatively, when calculating the ULRD, auditors will typically round the sample size down (i.e., 80 from 88) to then arrive at the ULRD of 5.8%. Extrapolation can also be done between 5.8 and 5.2. For example, 88 is 8/10s of the way to 90. The ULRD is 5.8 at a sample size of 80. The URLD is 5.2 at a sample size of 90. Therefore, we can extrapolate by taking 80% of the URLD difference of .6 (.48) and arrive at a URLD of 5.32 (5.8 - .48). But, 5.8 is more conservative than an extrapolated 5.32. It is more conservative, because the higher the ULRD, the more likely it will exceed the tolerable rate of deviation, resulting in a change in internal control assessment (if it is actually higher). What is the Allowance for Sampling Risk? The allowance for sampling risk is the difference (the cushion) between the sample rate of deviation and the ULRD. In this instance, that is 4.67%, the difference between the sample rate of deviation of 1.13% and the URLD of 5.8. Can we rely on the control as working?