The deviation rate the auditor will permit in the population and still be willing to use the assessed level of control risk established during planning is called the:
A) tolerable deviation rate (TDR).
B) sample deviation rate (SDR).
C) acceptable risk of overreliance (ARO).
D) estimated population deviation rate.

Question

Quizplus · Accepted Answer

The tolerable deviation rate (TDR) is the maximum deviation rate that the auditor is willing to tolerate in the population while still being willing to use the assessed level of control risk established during planning. This means that any deviation rate in the population that exceeds the TDR will cause the auditor to reconsider the assessed level of control risk and possibly increase it. The sample deviation rate (SDR) is the deviation rate observed in the sample that the auditor tested and is used to estimate the deviation rate in the population. The acceptable risk of overreliance (ARO) is the risk that the auditor is willing to accept of material misstatement in the financial statements. The estimated population deviation rate is the auditor's best estimate of the deviation rate in the population based on the sample tested.

The Deviation Rate the Auditor Will Permit in the Population