When the computed upper exception rate (CUER) is greater than the tolerable exception rate (TER), it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to justify?
A) Reduce the tolerable exception rate so as to accept the sample results.
B) Expand the sample size and perform more tests.
C) Revise the assessed control risk upward.
D) Write a letter to management which outlines the control deficiencies.

Question

Quizplus · Accepted Answer

It would be difficult to justify reducing the tolerable exception rate because this would lower the expectation for the control and increase the risk of material misstatement. The auditor has to ensure that the control risk is at an appropriate level, and manipulating the tolerable exception rate would not achieve that. Instead, the auditor may consider performing additional tests, increasing the sample size, revising the assessed control risk upward, or communicating control deficiencies to management.

When the Computed Upper Exception Rate (CUER) Is Greater Than