Based on a five per cent risk of assessing control risk too low, how would an auditor interpret a computed upper deviation rate of seven per cent?
A) There is a five per cent chance that the deviation rate in the population is less than seven per cent.
B) The auditor is willing to tolerate a deviation rate of seven per cent before deciding not to rely on the control.
C) There is a 95 per cent chance that the deviation rate in the population equals seven per cent.
D) There is a five per cent chance that the deviation rate in the population exceeds seven per cent.

Question

Quizplus · Accepted Answer

The computed upper deviation rate is the highest deviation rate that the auditor is willing to accept based on the assessed level of control risk. If the actual deviation rate in the population exceeds the computed upper deviation rate, then the auditor may conclude that the control is not effective. Based on a five per cent risk of assessing control risk too low, there is a five per cent chance that the actual deviation rate in the population exceeds the computed upper deviation rate of seven per cent. Therefore, the correct interpretation is that there is a five per cent chance that the deviation rate in the population exceeds seven per cent.

Based on a Five Per Cent Risk of Assessing Control