If an auditor calculated an upper limit rate of deviation of 5% when the tolerable rate of deviation was 4%,the auditor would conclude that:
A)The population deviation rate is low enough to rely on internal control as planned.
B)The population deviation rate may be higher than that necessary to rely on internal control as planned.
C)The control risk can be assessed at planned levels.
D)The control risk should be assessed at lower levels.

Question

Quizplus · Accepted Answer

If the upper limit rate of deviation exceeds the tolerable rate of deviation, the auditor cannot be confident that internal control is effective enough to achieve the planned level of control risk. This means that the population deviation rate may be higher than what is necessary to rely on internal control as planned. Therefore, the auditor would need to consider alternative audit procedures, such as increasing the sample size or performing additional substantive procedures, to obtain sufficient audit evidence.

If an Auditor Calculated an Upper Limit Rate of Deviation