The Audit Team Is Planning to Examine a Sample of Control

Multiple Choice

The audit team is planning to examine a sample of control policies and procedures.Assume that,based on the intended degree of reliance on internal control,the audit team wishes to control the risk of overreliance to 5% and,based on past audits,estimates the expected population deviation rate to be 2%.Initially,the audit team was planning for a moderate degree of reliance on internal control and established a tolerable rate of deviation of 7%; however,it is considering increasing its reliance on internal control and reducing the tolerable rate of deviation to 4%.Which of the following is not true with respect to the impact of the reduction in the tolerable rate of deviation on sample size?

A) The reduction in the tolerable rate of deviation would result in a smaller sample size.
B) The audit team would likely not seek a reduction in the tolerable rate of deviation unless it could obtain a reduction in its substantive testing.
C) The resultant sample size assuming the reduction in the tolerable rate of deviation would be 294 items.
D) The reduction in the tolerable rate of deviation would result in the audit team examining an additional 206 items.