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%. The allowance for sampling risk was

A) 5½%.
B) 4½%.
C) 3½%.
D) 1%.