The audit team is planning to examine a sample of control policies and procedure

Question

The audit team is planning to examine a sample of control policies and procedures. Assume that the audit team establishes a tolerable rate of deviation of 6% and, based on past audits, estimates the expected population deviation rate to be 2%. Which of the following is not true with respect to the impact of the risk of overreliance on sample size?

A. The risk of overreliance has an inverse impact on sample size.

B. The risk of overreliance should be assessed at higher levels if the audit team wishes to place lower levels of reliance on internal control.

C. If the audit team assesses the risk of overreliance at 10%, the resultant sample size would be 88 items.

D. If the audit team reduced the risk of overreliance from 10% to 5%, the resultant decrease in the sample size would be 39 items.

Explanation / Answer

Option D. If the audit team reduced the risk of overreliance from 10% to 5%, the resultant decrease in the sample size would be 39 items is false.

The audit team should select a large sample of control for examination, when the the risk of overreliance is reduced from 10% to 5%.

Therefore, there will not be a resultant decrease, but an increase in the sample size by 39 items, adding to the 88 samples at 10%

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