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?
Since the sample indicates that only 2% (10 out of 500) of the sampled investments did not have both required authorizations, and this deviation rate is below the acceptable error rate of 5%, no further testing of investment authorizations is required. This indicates that the internal control process is functioning adequately within the acceptable error threshold.
The deviation rate is only 2% (10/500) while the acceptable error rate is 5%
Thank you.
Why not C?