When the computed upper deviation rate is greater than the tolerable deviation rate, it is necessary for the auditor to take specific action.Which of the following courses of action would be most difficult to defend if the auditor is ever subject to review by a court?
A) Write a letter to management.
B) Expand the sample size.
C) Revise the assessed control risk.
D) Revise and relax the tolerable deviation rate (TDR) or the acceptable risk of assessing control risk too low (ARO).

Question

Quizplus · Accepted Answer

Revising and relaxing the tolerable deviation rate or acceptable risk of assessing control risk too low would be the most difficult to defend because it implies that the auditor is willing to accept a higher level of risk than originally planned. This could jeopardize the overall effectiveness of the audit and potentially lead to legal liability if material misstatements are later discovered. Writing a letter to management or expanding the sample size are both reasonable courses of action to address the issue of a high upper deviation rate. Revising the assessed control risk is also possible, but it may have implications on the overall audit strategy and should be carefully evaluated before implementation.

When the Computed Upper Deviation Rate Is Greater Than the Tolerable