An Internal Auditor Is Testing, on a Sample Basis, Whether

Multiple Choice

An internal auditor is testing, on a sample basis, whether invoices paid between January 1 and December 31 are supported by appropriately approved purchase orders. Over 25, 000 invoices were paid during the fiscal year, which runs from the first of April to the end of March. The auditor sets the acceptable risk of assessing control risk too low at 5% and the tolerable deviation rate at 5%. The internal auditor consults the previous audit and sets the expected population deviation rate at 1%. Sample size (77) is selected from a table and rounded up to 80. No sample deviations were found. The upper deviation limit was 3.7%. Which of the following statements represents a valid conclusion regarding this information?

A) I am 95% confident that the true, but unknown, population deviation rate is less than or equal to 3.7%. Results indicated that the sample size was too small, as no sample deviations were found.
B) I am 95% confident that the actual population deviation rate is 3.7%. Since this is less than the tolerable deviation rate, quantitative attribute testing results indicate that the control is effective.
C) I am 95% confident that the true, but unknown, population deviation rate is less than or equal to 3.7%. The quantitative attribute testing results indicate that the control is effective.
D) I am 95% confident that the true, but unknown, population deviation rate is less than or equal to 3.7%. The quantitative attribute testing results indicate that the control is not effective.