If an auditor calculated an upper limit rate of deviation of 5% when the tolerable rate of deviation was 4%,the auditor would conclude that
A) the population deviation rate is low enough to rely on internal control as planned.
B) the population deviation rate may be higher than that necessary to rely on internal control as planned.
C) the control risk can be assessed at planned levels.
D) the control risk should be assessed at lower levels.

Question

Quizplus · Accepted Answer

An upper limit rate of deviation of 5% exceeds the tolerable rate of deviation of 4%. This means that the population deviation rate may be higher than what is necessary to rely on internal control as planned. Therefore, the auditor may need to reassess the control risk and perform additional substantive procedures to obtain sufficient evidence about the reliability of the control system. Choice A is incorrect because a 5% upper limit rate of deviation is not low enough to rely on internal control as planned. Choice C is incorrect because the calculated upper limit rate of deviation exceeds the tolerable rate of deviation, which means that control risk cannot be assessed at planned levels. Choice D is incorrect because the control risk should be reassessed at higher levels, not lower levels.

If an Auditor Calculated an Upper Limit Rate of Deviation