Assume that your audit assistants also performed tests of controls on a sample of 200 purchases. During the tests they found that 16 purchases did not comply with the control procedures as laid down. This gave a sample deviation rate of 8%. After performing the tests, the audit assistant noted the following conclusion: 'The deviation rate of 8% is below the quantitative materiality level of 10% as outlined in the accounting standards. Therefore, controls over purchases can be relied on'. Critically evaluate the appropriateness of the assistant's evaluation of sampling results relating to the tests of controls on purchases.

Assume that your audit assistants also performed tests of controls on a sample of 200 purchases. During the tests they found that 16 purchases did not comply with the control procedures as laid down. This gave a sample deviation rate of 8%. After performing the tests, the audit assistant noted the following conclusion: 'The deviation rate of 8% is below the quantitative materiality level of 10% as outlined in the accounting standards. Therefore, controls over purchases can be relied on'. Critically evaluate the appropriateness of the assistant's evaluation of sampling results relating to the tests of controls on purchases.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Assume that your audit assistants also performed tests of controls on a sample of 200 purchases. During the tests they found that 16 purchases did not comply with the
control procedures as laid down. This gave a sample deviation rate of 8%. After performing the tests, the audit assistant noted the following conclusion: The deviation
rate of 8% is below the quantitative materiality level of 10% as outlined in the accounting standards. Therefore, controls over purchases can be relied on'. Critically
evaluate the appropriateness of the assistant's evaluation of sampling results relating to the tests of controls on purchases.

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Step 2: Evaluate the Assistant's Conclusion

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Step 3: Examine the Deviation Rate

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Step 4: Consider Materiality Level

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