An Auditor Wanted to Test Credit Approval on 10,000 Sales

Multiple Choice

An auditor wanted to test credit approval on 10,000 sales invoices processed during the year.The auditor designed a statistical sample that would provide a 1% risk of overreliance (99% confidence) that not more than 7% of the sales invoices lacked approval.The auditor estimated from previous experience that about 2½% of the sales invoices lacked approval.A sample of 200 invoices was examined,and 7 of them were lacking approval.The auditor then determined the upper limit rate of deviation to be 8%. In the evaluation of this sample,the auditor decided to increase the level of the preliminary assessment of control risk because the

A) Tolerable rate of deviation (7%) was less than the upper limit rate of deviation (8%) .
B) Expected population deviation rate (7%) was more than the percentage of errors in the sample (3½%) .
C) Expected population deviation rate (2½%) was less than the tolerable rate of deviation.
D) Upper limit rate of deviation (8%) was more than the percentage of errors in the sample (3½%) .