Which of the following represents the best description of the tolerable exception?
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 ARACR.

Question

Quizplus · Accepted Answer

The tolerable exception represents the highest exception rate that the auditor can allow and still conclude that the control being tested is operating effectively. It is the benchmark against which the actual exception rate from the sample is compared to determine if the control is effective or not. Therefore, option A is the best description of the tolerable exception. Option B is incorrect because it refers to the expected exception rate, not the tolerable exception rate. Option C represents the sample exception rate, which is used to estimate the population exception rate, but it is not the same as the tolerable exception rate. Option D refers to the highest estimated exception rate in a population at a given ARACR, which is related but not equivalent to the tolerable exception rate.

Which of the Following Represents the Best Description of the Tolerable