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AICPA CPA-Auditing Exam - Topic 1 Question 126 Discussion

An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a statistical sample that would provide 1% risk of assessing control risk too low (99% confidence) that not more than 7% of the sales invoices lacked approval. The auditor estimated from previous experience that about 2.5% 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 deviation rate to be 8%.The allowance for sampling risk was:
B) 4.5%
A) 5.5%
C) 3.5%
D) 1%

AICPA CPA-Auditing Exam - Topic 1 Question 126 Discussion

Actual exam question for AICPA's CPA-Auditing exam
Question #: 126
Topic #: 1
[All CPA-Auditing Questions]

An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a statistical sample that would provide 1% risk of assessing control risk too low (99% confidence) that not more than 7% of the sales invoices lacked approval. The auditor estimated from previous experience that about 2.5% 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 deviation rate to be 8%.

The allowance for sampling risk was:

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Suggested Answer: B

Choice 'b' is correct. The allowance for sampling risk is the excess of the 8% upper deviation rate over the 3.5% (= 7 200) sample deviation rate, or 4.5%.

Choices 'a', 'c', and 'd' are incorrect, based on the above Explanation: .


by Carla at May 12, 2026, 01:35 AM

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Eve
The upper deviation rate is 8%, so the allowance for sampling risk is 5.5%.
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Milly
5 days ago
I think the allowance for sampling risk is calculated based on the difference between the expected and actual rates. I might lean towards option B, but I need to double-check my calculations.
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Alonso
10 days ago
I feel like I should be able to figure this out, but the upper deviation rate being 8% is throwing me off. Wasn't the goal to keep it under 7%?
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Shasta
15 days ago
This question seems similar to one we did in class about determining the allowance for sampling risk. I think it might be around 4.5%, but I can't recall the exact steps.
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Willard
2 months ago
I remember we practiced calculating the allowance for sampling risk, but I'm not sure how to apply it here with the upper deviation rate.
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