Reference no: EM133127894

Question - Ben and Emily, two auditors you work with at the Internal Audit Department of ABC Company, have independently assessed the risks associated with the accounts receivable. The appropriate audit risk for both is determined to be .02. Both agree that inherent risk should be set at the maximum (1.0) and that no analytical procedures will be performed. Ben evaluates control risk as moderate (.40) while Emily assesses it as relatively low (.20).

ABC Company processes an average of 400 vouchers payable every month. Each voucher package contains a copy of the cheque disbursed and supporting documents such as vendor invoices, receiving reports, and purchase orders. The Auditor plans to example a sample of vouchers listed in the voucher registry using attribute sampling to evaluate the effectiveness of several controls. The attributes include:

I) Agreement of voucher amounts with invoice amounts;

II) Voucher cancelled after payment

Based on past experience, the auditor expects a deviation rate of 2% for the first attribute and 1% for the second. The Auditor decides on a tolerable deviation rate of 7% for the first attribute and 6% for the second. The risk of assessing control risk too low is set at 5%. Assume that the auditor's tests uncovered 2 occurrences of voucher amounts not agreeing with invoice amounts and 2 occurrences of vouchers not being cancelled after payment.

Required - Using Emily's assessment, what is the achieved upper deviation limit for Attribute II?