When determining tolerable exception rate (TER),
A) the auditor considers the degree of reliance to be placed on the control and the significance of the control to the audit.
B) if only one internal control is used to support a low control risk assessment for an objective, TER will be higher for the attribute than if multiple controls are used to support a low control risk assessment for the same objective.
C) control deviations increase both the risk of material misstatements in the accounting record, and will always result in misstatements.
D) a smaller sample size is needed for a low TER than for a high TER.

Question

Quizplus · Accepted Answer

The tolerable exception rate (TER) is influenced by the degree of reliance placed on the control and the significance of the control to the audit. TER is the maximum deviation from a control that the auditor is willing to accept and still rely on the control in assessing control risk. Choice B is incorrect because if multiple controls are used to support a low control risk assessment for the same objective, TER will be lower for the attribute. Choice C is incorrect because control deviations do not always result in misstatements, but increase the risk of material misstatement in the accounting records. Choice D is incorrect because a larger sample size is needed for a low TER than for a high TER.

When Determining Tolerable Exception Rate (TER)