Response to the following problem:
The questions below relate to determining the CUER in audit sampling for tests of controls, using the following table:
|
|
1
|
2
|
3
|
4
|
|
ARO (in percent)
|
10
|
10
|
5
|
5
|
|
Population size
|
5,000
|
50,000
|
5,000
|
50,000
|
|
Sample size
|
50
|
100
|
50
|
100
|
|
Number of exceptions
|
2
|
4
|
2
|
3
|
|
CUER
|
10.3
|
7.9
|
12.1
|
7.6
|
Required:
a. Calculate SER for each of columns 1 through 4 and use this to calculate the actual allowance for sampling risk.
b. Explain why the CUER is higher for the attribute in column 1 than the attribute in column 2.
c. Explain why the CUER higher for the attribute in column 3 than the attribute in column 1.
d. Assume that the TER for attribute 4 is 6 percent. Your audit senior indicates that he would like to be able to rely on this control and has asked you to increase the sample by an additional 50 items. Use the appropriate statistical sampling table to evaluate whether the increase in the sample is likely to result in favorable results for the entire sample of 150 items.