Tolerable rate of deviation. The risk of incorrect rejection of book value.

Tolerable rate of deviation lower Likelihood that the decision based on the sample differs from the decision that would have been made if the entire population had been examined. Identical to the expected rate of deviations in the related accounting records. Choice "d" is correct. The interpretation of the ULRD in an attributes sampling application is The estimated rate of deviation in the population with probability equal to the Jones, CPA, believes the industry-wide deviation rate of client billing errors is 3% and has established a tolerable deviation rate of 5%. If the deviation rate is higher than this threshold value, then the auditor cannot rely upon the control. If an auditor of a nonissuer discovers an unexpectedly high number of deviations during procedures performed on a sample to test management's review and approval of time sheets, then the auditor would most appropriately: A. Expected population deviation rate 1. The tolerable rate of deviation is 2 percent. The tolerable deviation rate has an inverse relationship with sample size, which increases as the tolerable deviation rate decreases. tolerable rate of deviation; expected Study with Quizlet and memorize flashcards containing terms like T/F: Stratification of the population generally results in a more efficient sampling plan. The auditor should consider the tolerable rate of deviation from the controls being tested in determining sample size. tolerable rate of deviation. Based on the sample rate of deviation. dollar value of the of assessing. The allowance for sampling risk is approximately -5. 3. 4. Higher than the expected rate of deviations in the related accounting records. A) Increase. Yes Yes A) As the population size increases, the sample size should increase proportionately B) Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate C) There is an inverse relationship between the expected population deviation rate and the sample size D) In determining tolerable rate The auditors expect a population deviation rate of billing errors of eight percent, and have established a tolerable rate of five percent. The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate. both expected population deviation rate and tolerable rate. The deviation rates of both the auditor's sample and the population is less than the tolerable rate An increase in the tolerable rate of deviation from 3 percent to 6 percent. An auditor should consider the tolerable rate of deviation when determining the number of check requests to select for a test to obtain assurance that all check requests have been properly authorized. What is actual deviation rate? When the audit team actually tests the control, they will identify the actual deviation rate. the actual deviation rate in the population. May 15, 2024 · The tolerable deviation rate is the largest percentage variance experienced in audit sampling that an auditor will accept in order to rely upon a specific control. Sequential sampling is normally used when expected deviations occur at a relatively low rate in the population. The tolerable misstatement for purchases is $50,000. v PREFACE TO THE 2008 EDITION This paper contains technical notes on the 2008 edition of the AICPA Audit Guide Audit Sampling. Assume that Dodge wished to place additional reliance on this control. check requests control risk too low. ULRD; tolerable rate of deviation. C) There is an inverse relationship between the expected population deviation rate and sample size. SAMPLE RATE OF DEVIATION + ALLOWANCE FOR SAMPLING RISK. The company's materiality is $65,000. The auditor's tolerable rate of deviation is the level at which the control's failure to operate would cause the auditor to conclude that the control is not effective and would likely change the auditor's planned assessment of control risk in performing tests of account balances. ) Sample rate of Study with Quizlet and memorize flashcards containing terms like The expected population deviation rate of billing errors is 3%. g. In the review of client invoices the client should use Using AICPA sample evaluation tables, determine the conclusion from a statistical sample of internal controls when a sample of 125 documents indicates five deviations if the tolerable rate of deviation is 5 percent, the expected population deviation rate is 2 percent, and the allowance for sampling risk is 3 percent. ROO = 5%, EPDR = 0%, TRD = 7% b. A decrease in the number of deviations from 5 to 1. The risk of incorrect rejection of book value. Increase the tolerable rate of deviation. The allowable risk of assessing control risk too low has no effect on the planned sample size. The tolerable deviation rate is the deviation rate the auditor is willing to except before considering the control ineffective. The expected population deviation rate can either be based on prior audits or a small sample of controls examined in the current year. The tolerable rate of deviation is 3 percent. C) The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate. 3 discovery sampling. Tolerable rate of deviation + Allowance for sampling risk. Use the evidence to assess a higher control risk than planned because the sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation. tolerable. 2%, the upper limit rate of deviation is 8%, the tolerable rate of deviation is 7%, and the risk of overreliance is 5%, which of the following statements is not true?, An auditor uses an attribute sampling plan to determine whether large expenditures are being properly approved. , Which of the b) Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate. b. A. c Study with Quizlet and memorize flashcards containing terms like If the sample rate of deviation is 6. The expected deviation rate should exceed the tolerable deviation rate, An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when: A. What is the appropriate sample size in this situation? 55. , In attributes sampling, which of the following will not affect the determination of sample size? a. Tolerable deviation rate (7%) was less than the achieved upper deviation limit (8%). 5%, the sample deviation rate is 2%, and the risk of assessing control risk too low is 5%? The audit team is planning to examine a sample of control policies and procedures. The population deviation rate may be higher than that necessary to rely on internal control as planned. Use the original parameters but now assume that Phillips is willing to increase the acceptable risk of overreliance to 10 percent. Stratified sequential sampling D. increased and a. Dev. An increase in the tolerable rate of deviation from 2% to 5%. The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate in the population is less than the tolerable rate. In the review of client invoices the auditor should use, What sampling method would be used to estimate a numerical measurement of a population, such as a dollar value?, What is the *primary* objective of using If a control is judged to be more important and would result in a more significant reduction in substantive testing, the tolerable rate of deviation is generally established at _____ levels. This term is sometimes referred to as the tolerable failure rate. C Using the row for a 2 percent expected deviation rate and the column for a tolerable deviation rate of 8 percent, we find a required sample size of 77 items, with 2 allowable deviations. What is an auditor's evaluation of a statistical sample for attributes when a test of 50 documents results in 3 deviations if the tolerable rate is 7%, the expected population deviation rate is 5%, and the allowance for sampling risk is 2%? You have been asked to test the effectiveness of Ingo Corporation's control of manually approving all purchases over $25,000. When determining the sample size for a test of controls, the auditor should consider the expected deviation rate (which is the auditor's best estimate of the deviation rate in the population before the sampling plan is executed), the tolerable deviation rate, and the allowable risk of assessing control risk too low. The audit team is planning to examine a sample of control policies and procedures. The sampling approach most likely to be used is: A) Attributes sampling. Study with Quizlet and memorize flashcards containing terms like Which of the following statistical techniques are used to test controls?, In determining the tolerable deviation rate for a test of controls, the auditors consider:, If the actual deviation rate in the sample is greater than the expected deviation rate: and more. B) reject the account balance as fairly stated. , T/F: Increases in the number of deviations in an attributes sample results in a decrease in the achieved upper deviation rate of the How is the tolerable rate of deviation established by the auditor?Multiple ChoiceBased on the necessary level of detection risk determined from the use of the audit risk model. e. In determining the tolerable rate of deviation, an auditor considers the desired level of detection risk. The auditor is The auditor should consider the tolerable rate of deviation from the controls being tested in determining sample size. ) An audit team designed a sample that would provide a 10 percent risk of over-reliance that not more than 7 percent of sales invoices lacked credit approval. The amount of any substantive errors. D) The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate in the population is less than the tolerable rate. c. (j ) Tolerable rate of deviation – A rate of deviation from prescribed internal control procedures set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation in the population. Tolerable rate of deviation 4 %. Allowable Risk Tolerable Rate Expected Pop. A measure of the difference between sample estimate (projection) and the tolerable rate of deviation or tolerable misstatement at a specified sampling risk. An increase in the tolerable rate of deviation from 3 percent to 6 percent. tolerable rate. For example, if the tolerable rate for a population is 5 percent and no deviations are found in a sample of 60 items, the auditor may conclude that there is an acceptably low sampling risk that the true deviation rate in the population exceeds the tolerable rate of 5 percent. Expected population b. tolerable To determine the extent to which some characteristic exists within a population of interest, auditors use ____ sampling If the upper limit rate of deviation exceeds the tolerable rate of deviation, the auditor would most likely: a. increase the planned effectiveness of substantive procedures. If this maxi-mum population deviation rate is less than the tolerable rate, the test supports the planned assessment of control risk. Expected population deviation rate: No Tolerable rate: Yes c. Attributes sampling C. Of all the factors Study with Quizlet and memorize flashcards containing terms like Which of the following factors is most likely established based on the results of prior years' audit examinations?, If the risk of overreliance is 5%, the tolerable rate of deviation is 8%, and the expected population deviation rate is 1%, the necessary sample size is:, Which of the following combination of factors would yield (j) Tolerable rate of deviation – A rate of deviation from prescribed internal control procedures set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation in the population. Question: If the upper deviation rate exceeds the tolerable rate of deviation, the auditor would most likely: A) accept the account balance as fairly stated. $250,000. An increase in the expected population deviation rate from 2 percent to 4 a. (3) The risk of assessing control risk too low is less than the expected deviation rate. Deviations from pertinent controls do not affect the risk of material misstatement in the accounting records. Study with Quizlet and memorize flashcards containing terms like The tolerable rate of deviation for tests of controls necessary to justify a control risk assessment depends primarily on which of the following? a. Your audit team has estab- lished the following parameters for the examination of ELM's control over the authorization of sales: Population size Risk of overreliance 388 shipments 10% 1% Expected population deviation rate Tolerable rate of deviation 6% Required: a. 2 variable sampling. Assume that, based on the intended degree of reliance on internal control, the audit team wishes to control the risk of overreliance to 5% and establishes a tolerable deviation rate of 8%. Review each of the following independent sets of conditions. If the auditor accepts a 10% risk of overreliance, a 7% tolerable deviation rate, and expects a deviation rate of 2. All of the transactions below would be considered executed, EXCEPT -a homeowner purchased several large trees from a nursery, including installation and planting services. The deviation rates of both the auditor's sample and the population are less than the tolerable rate. In the review of client invoices, Jones should use attributes sampling. j. Expected population The maximum rate of deviations permissible by the audit team without modifying the planned assessed level of control risk is the rate of deviation. Question: If the _____blank exceeds the _____blank, the audit team would decide to rely on internal control as planned and maintain control risk at planned levels. What should the auditor do next?, Which of the Using AICPA sample evaluation tables, determine the conclusion from a statistical sample of internal controls when a sample of 125 documents indicates five deviations if the tolerable rate of deviation is 5 percent, the expected population deviation rate is 2 percent, and the allowance for sampling risk is 3 percent. Business; Accounting; Accounting questions and answers; The upper limit rate of deviation in attributes sampling isMultiple Choicealways less than the tolerable rate of deviation. Risk of incorrect acceptance. , What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in 4 deviations if the tolerable rate of deviation is 5%, the expected population deviation rate is 3%, and the allowance for What is an auditor's evaluation of a statistical sample for attributes when a test of 50 documents results in 3 deviations if the tolerable rate is 7%, the expected population deviation rate is 5%, and the allowance for sampling risk is 2%? D. Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable population deviation rate. Question: Which of the following would not result in the audit team's selecting a larger sample of controls for examination?Multiple ChoiceA reduction in the risk of overreliance from 10 percent to 5 percent. the deviation rates of both the auditor's sample and the population are less than the tolerable rate of deviation. Required: Use the AICPA sample size tables to identify the appropriate sample size for use in a statistical sampling application (ROO = risk of overreliance, 'EPOR=expected population deviation rate, TRD = tolerable rate of deviation). a statistical calculation that considers sampling risk. Assume a 5% risk of overreliance, a tolerable deviation rate of 8%, a sample size of 100, and that the The deviation rate in the auditor's sample is less than the tolerable rate of deviation, but the deviation rate in the populations exceeds the tolerable rate of deviation What component of the audit risk model is most closely associated with attributes sampling D) variables sampling. B) higher than the expected rate of deviations in the related accounting records. C) Decrease. If an audit team examined 100 transactions and found one deviation from an important control activity, the audit conclusion could be that control risk can be assessed at the associated control risk level when A. The extent of reliance to be placed on the procedures. The tolerable rate of deviation is 4 Evaluating management's integrity during the client acceptance process. and more. Sample rate of deviation can be calculated as follows: Therefore, sample rate of deviation is Answer to The upper limit rate of deviation in attributes. The cause of errors. assessed at the maximum level (100 percent) because the company's performance failed the test. Applying Nonstatistical Sampling for Tests of Controls A. -Allowance for sampling risk-Expected population deviation rate-Sample rate of deviation-Tolerable rate of deviation Tolerable rate of deviation A type of sampling application in which a relatively small initial sample is examined and decisions regarding expanding that sample are based on the results of this initial sample known as? The maximum rate of deviations permissible by the audit team without modifying the planned assessed level of control risk is the ___ rate of deviation. , The auditors expect a population deviation rate of billing errors of eight percent, and have established a tolerable rate of five percent. Which of the following statements is true in an attribute sampling plan where the tolerable deviation rate is 7%, the computed upper deviation rate is 6. control risk. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000 Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 6 percent (although she expects the rate to be only approximately 6 25 percent) and a 5 What is an auditor's evaluation of a statistical sample for attributes when a test of 150 documents results in 8 deviations if tolerable rate is 6%, the expected population deviation rate is 4%, and the allowance for sampling risk is 1%? Study with Quizlet and memorize flashcards containing terms like One example of the circumstances in which the auditor might use MUS includes accounts receivable confirmations when credit balances are not significant. It is a rate of deviation set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set is not exceeded by the actual rate of deviation in the population. Study with Quizlet and memorize flashcards containing terms like In assessing the tolerable rate of deviations of a test of controls that was performed using statistical sampling, an auditor should consider that: A. A conservative estimate of the population rate of deviation that allows the audit team to control exposure to sampling risk to acceptable levels is the blank rate of deviation. the deviation rates of both the auditor's sample and the population exceed the tolerable rate of deviation. Increase Increase Decrease D. Baily Cox, an audit manager, judged that the test of controls of the company's 50,000 purchase transactions should be based on a tolerable rate of deviation of 6 percent, a risk of over-reliance of 5 percent, and an expected population deviation rate of 3 percent. Tolerable rate. 4 attribute sampling. ) Sample rate of deviation plus the allowance for sampling risk equals the tolerable deviation rate B. The allowance for sampling risk is also referred to as precision Indicate how Phillips would assess the three parameters that are used to determine sample size (risk of overreliance, expected population deviation rate, and tolerable rate of deviation). As the expected deviation rises, the sample size decreases. Increase Decrease Increase B. The sampling approach most likely to be used is: A. If an auditor calculated an upper limit rate of deviation of 5 percent when the tolerable rate of deviation was 4 percent, the auditor would conclude that B. The deviation rates of both the auditor's sample B. % or $ difference) that is allowed before the audit team determines that the control is not operating effectively. Decrease Increase Decrease C. Based on the desired level of control risk. Deviations from pertinent controls at a given rate ordinarily Assume that the audit team established a tolerable rate of deviation of 5%, an expected population deviation rate of 1%, and desired to control the risk of overreliance to 5%. 85%. a. - As the estimated rate of deviation decreases, the auditor should increase the planned sample size. 80 Attributes Sampling with IDEA: Determining Sample Size. (2) The planned assessed level of control risk is at a level slightly below the maximum. An increase in the tolerable rate of deviation from 3 percent to 6 percent. The auditor has established a tolerable rate of 5%. accept the account balance as fairly stated. B) Remain the same. You can think of tolerable misstatements or tolerable rate of deviation as a box that holds detected, undetected and individually immaterial misstatements together. I have written the paper to document the key statistical tables in the guide for the benefit of statistical specialists, Study with Quizlet and memorize flashcards containing terms like If the _____ exceeds the _____, the audit team would decide to rely on internal control as planned and maintain control risk at planned levels. May 20, 2024 · Learn how to calculate and apply tolerable deviation rates in audits, and understand their role in evaluating internal controls across various industries. The deviation rates of both the auditor's sample and the population exceed the tolerable rate. , T/F: Discovery sampling is equivalent to an attributes sampling plan with a very low deviation rate. The sampling approach most likely to be used is: (1) The expected deviation rate exceeds the tolerable deviation rate. d) In determining tolerable rate, an auditor considers detection risk and the sample size. What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in 4 deviations if the tolerable rate of deviation is 5%, the expected population deviation rate is 3%, and the allowance for sampling risk is 2%? B. C) conduct year-end testing D) not increase the planned effectiveness of substantive procedures. Expected population deviation rate + Allowance for sampling risk. 6. sample d. Required: a. Explain: 41. Based on the level used in prior years' audits. A sample which exceeds the tolerable rate of deviation results in the auditor's reliance on internal control effectiveness. 646 Audit Evidence • Fortestsofcontrols: — The tolerable rate of deviation of the population to be tested — Theexpectedrateofdeviationofthepopulationtobetested population deviation rate) is shown where the two factors meet. As the likely rate of deviation decreases, the auditor should increase the planned sample size. Expected deviation rate. The sample size of a test of controls varies inversely with: expected population deviation rate. The maximum rate of deviation that may exist in the operation of a control policy or procedure before the auditors would reduce reliance on internal control is referred to asMultiple Choice upper limit rate of deviation. , Also referred to as a precision, this sampling item allows auditors to create an interval around the sample results in which the true population characteristic is expected to lie. Sample rate of deviation plus the allowance for sampling risk equals the tolerable population deviation rate. , The tolerable deviation rate for a test of controls is generally A. d. Full payment was made, and delivery and planting are scheduled for next week -Bluewave Study with Quizlet and memorize flashcards containing terms like Which of the following factors is most likely established based on the results of prior years' audit examinations?, If the risk overreliance is 5%, the tolerable rate of deviation is 8%, and the expected population deviation rate 1%, the necessary sample size is:, Which of the following combination of factors would yield the Baily Cox, an audit manager, judged that the test of controls of the company's 50,000 purchase transactions should be based on a tolerable rate of deviation of 6 percent, a risk of overreliance of 5 percent, and an expected population deviation rate of 3 percent. Sample size a. Q D. The auditor should also consider: The average The allowable risk. D) In determining the tolerable rate of deviation, an auditor considers the desired level of detection risk. Again, this would be the % or The Tolerable Deviation Rate (TDR), often used in auditing, refers to the maximum rate of deviations from prescribed internal controls that the auditor is willing to accept without altering the planned assessed level of control risk. Tolerable Deviation Rate. (4) The tolerable deviation rate exceeds the risk of assessing control risk too low. expected population deviation rate; tolerable rate of deviation. upper limit c. the deviation rate in the auditor's sample is less than the What is an auditor's evaluation of a statistical sample for attributes when a test of 50 documents results in 3 deviations if tolerable rate is 7%, the expected population deviation rate is 5%, and the allowance for sampling risk is 2%? Question: If an audit team calculated a ULRD of 5 percent when the tolerable rate of deviation was 4 percent, both at the same risk of overreliance, control risk should be:Multiple Choicedecreased and substantive procedures should be adjusted accordingly. 5%, the sample size will be a number less than 109. Study with Quizlet and memorize flashcards containing terms like If the audit team established a tolerable rate of deviation of 3%, an expected population deviation rate of 2%, and desired to control the risk of overreliance to 5%, what sample size would be appropriate in this situation?, Which of the following allow the auditor to limit the exposure to sampling risk?, An increase in which of B. reject the account balance as fairly stated. Study with Quizlet and memorize flashcards containing terms like Execution of a transaction is one common step in any transaction stream. The maximum population deviation rate the auditor is willing to accept without altering the planned assessed level of control risk. Understanding tolerable deviation rates is crucial for auditors aiming to ensure the accuracy and reliability of their findings. Risk of incorrect rejection. J is testing B’s effectiveness of an important control and assessed a relatively low overreliance risk, 5% and tolerable rate of deviation, 6%. Discovery sampling B. The deviation rate in an auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate What is an auditor's evaluation of a statistical sample for attributes when a test of 50 documents results in 3 deviations if the tolerable rate is 7%, the expected population deviation rate is 5%, and The most likely explanation for this situation is that a. For example, a low (3–7%) rate might be used if substantial reliance on the control is planned. C) identical to the expected rate of deviations in the related accounting records. always greater than the tolerable rate of deviation. The sample rate of deviation is 5%, and the upper limit rate of deviation is approximately 11. c) There is an inverse relationship between the expected population deviation rate and the sample size. Confidence Level 37) The auditors expect a population deviation rate of billing errors of two percent, and have established a tolerable rate of five percent. Risk of underreliance + Allowance for sampling risk. Study with Quizlet and memorize flashcards containing terms like Which of the following factors is most likely established based on the results of prior years' audit examinations?, If the risk of overreliance is 5%, the tolerable rate of deviation is 8%, and the expected population deviation rate is 1%, the necessary sample size is:, Which of the following combination of factors would yield Apr 10, 2022 · The tolerable rate of deviation; The expected rate of deviation in the population; The confidence or assurance level (complement of risk of overreliance). Explain: Baily Cox, an audit manager, judged that the test of controls of the company's 50,000 purchase transactions should be based on a tolerable rate of deviation of 6 percent, a risk of over-reliance of 5 percent, and an expected population deviation rate of 3 If the risk of overreliance is 5%, the tolerable rate of deviation is 8%, and the expected population deviation rate is 1%, the necessary sample size is: Multiple Choice 28 36 48 58 58 About us If an audit team calculated a ULRD of 5 percent when the tolerable rate of deviation was 4 percent, both at the same risk of overreliance, control risk should be a. . Of all the factors to be Study with Quizlet and memorize flashcards containing terms like A deviation rate_____. The maximum rate of deviations permissible by the audit team without modifying the planned assessed level of control risk is the rate of deviation. , The sample size of a test of controls varies inversely with: a. The auditor may decide the desired level of assurance based on the extent the auditor’s risk assessment takes into account the relevant controls. Expected population deviation rate: No Tolerable rate: No d. This means that auditors should normally set tolerable misstatement for a specific audit procedure at less than financial statement The tolerable rate of deviation. C. - Of all the factors to be considered, the population size has the greatest effect on the sample size. acceptable rate of deviation. Multiple Choicetolerable rate of deviation; ULRDexpected population deviation rate; tolerable rate of deviationtolerable rate of deviation; expected population deviation rateULRD; tolerable Question: 8-25Determine the sample size for each of the control procedures shown in the following table (assuming a very large population):  Control ProcedureParameters 1 2 3 4Risk of incorrect acceptance 5% 5% 10% 10%Tolerable deviation rate 4% 5% 7% 8%Expected population deviation rate 1% 2% 3% 4%Sample size Study with Quizlet and memorize flashcards containing terms like In a test of purchase orders, the auditor selected a random sample of 60 items out of a population of 1,200 purchase orders. Inspecting employee time cards for proper approval by supervisors. (c) No. , Every estimate of a population is either a(n)_____ rate or a(n)_____ quantity. Sampling risk. All of the above are acceptable (Increase the assessed level of control risk, Perform additional substantive procedures, reducing the necessary level of detection risk, Expand the sample to achieve an observed upper limit rate of deviation less than the tolerable rate of deviation). 85%, indicating that there is a negative allowance, meaning that the sample results are well below the tolerable rate of deviation, providing some level of assurance for the effectiveness of the control. None of these. Study with Quizlet and memorize flashcards containing terms like Sample Deviation Rate, ULRD, ULRD < or = Tolerable rate of deviation and more. As the estimated rate of deviation decreases, the auditor should increase the planned sample size. The limit used in audits of similar clients. Variables sampling. Explain: An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the a) Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate. The auditor should consider the tolerable deviation rate from the controls being tested in determining sample size. An auditor established a $60,000 tolerable misstatement for an asset with an account balance of $1,000,000. Lower than the expected rate of deviations in the related accounting records. an auditor evaluates the effectiveness of the internal control systems of the client in assessing control risk so he/she needs to set tolerable rate of deviation (deviation of internal control systems from the auditor’s expectation). In determining the tolerable rate of deviation, an auditor considers detection risk and the sample size. D) Indeterminate, depends upon exact change being made. Tolerable population deviation rate minus the allowance for sampling risk exceeds the sample rate of deviation. The tolerable rate of deviation. Allowance for Sampling Risk = ULRD - Sample Rate of Deviation 2 Indicate how each of the following conditions affect the upper limit rate of deviation by using the letters (increase), D (decrease), or N (no effect). Correct B. In the review of client invoices the auditor should use: 1 stratified sampling. not increase the planned effectiveness of substantive procedures. Identify what factors Dodge considered in establishing the risk of overreliance, expected population deviation rate, and tolerable rate of deviation. The expected population deviation rate of client billing errors is 3%. E. Since 4 deviations is in excess of the allowable deviations (2) in Figure 9-4, the CPAs know that the upper limit is in excess of 8 percent. B. , 3) If all other factors specified in an attributes sampling plan remain constant, decreasing the tolerable rate and increasing the estimated population deviation rate would have what effect on sample size? A) Increase. 5 %. The auditor discovered $4,000 in overstatement in the sample. Rt A. As the tolerable deviation rate rises, the sample size decreases. False Which one of the following issues need not be addressed when planning an audit sample to test control procedures? If an auditor of a nonissuer discovers an unexpectedly high number of deviations during procedures performed on a sample to test management's review and approval of time sheets, then the auditor would most appropriately A. b) Tolerable rate less the allowance for sampling risk exceeds the sample rate of deviation. Increase Increase Increase, In planning a statistical sample for a test of controls, an auditor increased the expected population deviation rate from the prior year's rate because of the results of the Using AICPA sample evaluation tables, determine the conclusion from a statistical sample of internal controls when a sample of 125 documents indicates five deviations if the tolerable rate of deviation is 5 percent, the expected population deviation rate is 2 percent, and the allowance for sampling risk is 3 percent. , The sample size of a MUS sample is a function of the following factors: (1) the risk of incorrect acceptance, (2) the ratio of expected misstatement to tolerable misstatement a) expected deviation rate and tolerable deviation rate To determine the number of items to be selected for a particular sample for a test of controls, the auditor should consider the tolerable rate of deviation from the controls being tested, the likely rate of deviations (expected deviation rate), and the allowable risk of assessing control There is an inverse relationship between the sample size and the tolerable rate of deviation. , The tolerable deviation rate for a test of controls is generally: A) lower than the expected rate of deviations in the related accounting records. Using AICPA sample evaluation tables, determine the conclusion from a statistical sample of internal controls when a sample of 125 documents indicates five deviations if the tolerable rate of deviation is 5 percent, the expected population deviation rate is 2 percent, and the allowance for sampling risk is 3 percent. D. on the other hand tolerable misstatements are set to Upper deviation rate is the deviation rate you find in your sample plus the allowance for sampling risk (typically given and represents the chance of sampling risk that might be in your sample). For each condition, hold all other factors constant 1:30:11 1. 2. If the deviation rate in the sample is 6%, the allowance for sampling risk is 2% and the tolerable deviation rate is 9%, the assessed control risk is ____ the planned assessed level at For attributes sampling, auditors need to define the ______. Expected population deviation rate: Yes Tolerable rate: Yes b. The expected population deviation rate. 8 The auditor, using nonstatistical sampling for tests of controls, uses a. Upper deviation rate. Expected deviation rate. If the ULRD is greater than the tolerable rate of deviation, the audit team can reduce the reliance on internal control and increase control risk with a corresponding reduction of detection risk and increased substantive testing, or the audit team can expand the sample to achieve an observed ULRD less than or equal to the tolerable rate of deviation. the expected population deviation rate of client billing errors is 3%. The deviation rates of both the auditor's sample and the population are less than the tolerable B) The expected population deviation rate can either be based on prior audits or a small sample of controls examined in the current year. Refer to Exhibit 8. The tolerable deviation rate is the max allowable difference (e. An auditor who uses statistical sampling for attributes in testing internal controls should alter the assessed risk of material misstatement when the A. neither expected population deviation rate nor tolerable rate. tolerable tolerable misstatement is for financial statements and tolerable rate of deviation is for internal control. Based on past audits, the audit team would normally estimate the expected population deviation rate at 2%; however, because of improvements in the client's d. - The auditor should consider the tolerable deviation rate from the controls being tested in determining sample size. financial statement audit in such a way that tolerable misstatement, combined for all of the tests in the entire audit, does not exceed materiality for the fi-nancial statements. There is an inverse relationship between the expected population deviation rate and sample size. An auditor plans to examine a sample of 20 purchase orders for proper approvals as prescribed by the client's internal control. tolerable rate of deviation; ULRD. In sampling, the maximum rate of deviation from a prescribed procedure that the auditor will tolerate without modifying planned reliance on internal control. To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the allowable risk of assessing control risk too low, and the: a. tolerable The first step in the attributes sampling process is to determine the of attributes sampling. moyj spr zywmp tquhmku fukgrw tehi opka cvnpbd tia tnfa