Attribute Sampling Problem You have been assigned to test AB

Attribute Sampling Problem

You have been assigned to test ABC\'s internal controls over credit authorization. You have determined that there are 20,000 sales invoices processed during the year. The parameters given to you by the audit manager are: 95% confidence that no more than 5% of the sales invoices were not approved (deviations). Based on last year\'s audit, it is estimated that approximately 1% of sales invoices deviate from the internal control being tested. You can accept a toreable deviation rate of 5%. After selecting your sample size you discover 3 deviations.

Required:

Using the tables provided determine the sample size and evaluate your results given the 3 deviations uncovered.

Solution

We have tolerable deviation rate of 5%.

The expected population deviation rate is 1%.

From first table we get the Sample size to be 93.

Now, we have to use second table with 3 deviations given, This gives the upper deviation rate to be 8.4%.Thus the planned assessed level of control risk is not achieved.