An internal auditor is using attributes sampling to test internal controls. Under which of the following circumstances would the auditor increase the original sample size to estimate error occurrence at a given precision and confidence level?
A.
The sample rate of occurrence plus the precision exceeds the acceptable error rate.
B.
The sample rate of occurrence is less than the acceptable error rate.
C.
The acceptable rate of occurrence less the precision exceeds the sample rate of occurrence.
D.
The sample rate of occurrence plus the precision equals the acceptable error rate.
A. The sample rate of occurrence plus the precision exceeds the acceptable error rate:Correct. If the sample rate of occurrence (estimated error rate in the sample) plus the margin of error exceeds the acceptable error rate, it indicates a potential issue. To refine the estimate and maintain the desired confidence level and precision, the sample size needs to be increased.
B. The sample rate of occurrence is less than the acceptable error rate:If the sample rate is below the acceptable error rate, there is no immediate need to adjust the sample size.
C. The acceptable rate of occurrence less the precision exceeds the sample rate of occurrence:This condition does not imply the need to increase sample size but rather suggests acceptable results.
D. The sample rate of occurrence plus the precision equals the acceptable error rate:This indicates the estimate is at the threshold, but it does not necessitate increasing the sample size unless more precision is required.
CIA Exam Syllabus Reference:
Domain II: Risk Management and Control – Sampling and Error Analysis.
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit