Reference no: EM132903594

Question - Test the effectiveness of Ingo Corporation controls 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 $25000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 4% (although she expects the rate to be only appropriately 0.25 percent) and a 5 percent risk of assessing control risk too low.

Required - Show and explain the work.

1. What is the planned level of control risk?

2. What is the appropriate sample size to collect?

3. What is the allowable number of deviations?

4. If no deviations were found in the sample, what is the achieved upper deviation rate?

5. Would you conclude that controls are operating effectively? Explain.