Which of the following represents the best description of the tolerable exception rate?
A) the highest exception rate the auditor will permit in the control being tested and still conclude it is operating effectively
B) the highest exception rate the auditor expects to find in the population
C) the number of exceptions found in the sample divided by the sample size
D) the highest estimated exception rate in a population at a given estimated population exception rate.

Question

Quizplus · Accepted Answer

The tolerable exception rate is the highest exception rate the auditor will allow in the control being tested and still conclude that it is operating effectively. This rate is determined based on the level of risk that the control failure would pose to the financial statements. The auditor aims to keep the tolerable exception rate as low as possible to reduce the risk of material misstatement.

Which of the Following Represents the Best Description of the Tolerable