The risk which the auditor is willing to take in accepting a control as being effective when it is not is the:
A) allowable risk of overreliance (ARO).
B) tolerable deviation rate (TDR).
C) estimated population deviation rate.
D) sample deviation rate (SDR).

Question

Quizplus · Accepted Answer

The allowable risk of overreliance (ARO) is the level of risk that the auditor is willing to take in accepting a control as effective when it is not. This risk is determined by the auditor based on various factors such as the assessed level of inherent risk, the effectiveness of other controls, and the nature of the control being tested. The ARO is used to determine the maximum level of sampling risk that the auditor is willing to accept, which is the risk of concluding that a control is effective when it is not based on the results of the audit sample.

The Risk Which the Auditor Is Willing to Take in Accepting