You have been asked to test the effectiveness of Ingo Corporations control of manually approving...
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You have been asked to test the effectiveness of Ingo Corporations control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 5 percent (although she expects the rate to be only approximately 1.25 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed level of control risk and the assessed level of control risk.
(Planned) Assessed Level of Control Risk
Tolerable Deviation Rate
Low
27%
Moderate
612%
Slightly below the maximum
1120%
Maximum
Over 20%
a.What is the planned assessed level of control risk?
Low
Moderate
Slightly below the maximum
Maximum
b.Determine the appropriate sample size and allowable number of deviations using Figure 9.4.
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