Internal control processes in an organization require that all investments exceeding $20, 000 receive authorization from both the president and treasurer. After conducting a sample of these transactions, an auditor determined that 10 of the 500 investments in the sample had not included both required authorizations. The sample has a five percent acceptable error rate. Based on this sample, which of the following actions should the auditor take?
A) Confirm all of the investments with the organization's internal finance department.
B) Contact the organization's investment broker and confirm all investments.
C) Complete a comprehensive review of the organization's investment activity and compare variations over prior years.
D) Determine that no further testing of investment authorizations is required.

Question

Quizplus · Accepted Answer

The error rate in the sample is 2% (10 out of 500), which is below the acceptable error rate of 5%, indicating no further testing is required.

Internal Control Processes in an Organization Require That All Investments