Which of the following statements is true of the tolerable rate of deviation?
| | a. It is a rate of deviation set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set is not exceeded by the actual rate of deviation in the population. | | |
| | b. This term is sometimes referred to as the tolerable failure rate. | | |
| | c. The auditor's tolerable rate of deviation is the level at which the control's failure to operate would cause the auditor to conclude that the control is not effective and would likely change the auditor's planned assessment of control risk in performing tests of account balances. | | |
| | d. All of these statements are true. | An example of an attribute of interest to an auditor would be evidence that the client has matched vendor invoice details with the purchase order and receiving report before payment approval and noted that they match before authorizing a payment for the goods received. |
One example of the circumstances in which the auditor might use MUS includes accounts receivable confirmations when credit balances are not significant.
When the total estimated misstatement exceeds the tolerable misstatement, the auditor has available several possible courses of action. Two of the options are expanding the sample or changing the audit objective to estimating the correct value.
Which statement is false regarding the use of sampling and data analytics tools by auditors?
| | a. Auditors use sampling in testing account balances and assertions. | | |
| | b. Sampling involves looking at all of the transactions that occurred during the period under audit. | | |
| | c. Auditors use sampling in testing controls. | | |
| | d. Sampling techniques would be appropriate when an auditor wants to perform procedures such as examining documents, reperforming calculations, or sending confirmations. | |
