Tolerable Deviation Rate is defined as the maximum rate of acceptability of misstatement. It is the maximum possible variance accepted in audit sampling in order to rely upon a specific control. Upper Deviation Rate is defined as sample deviation rate and an appropriate allowance for sampling risks.If the upper deviation limit is less than or equal to the tolerable rate, the sample results support reliance on the control procedures tested. In this case, tolerable deviation rate i.e., 7% which is lower than upper deviation rate of 8% which clearly shows controls is ineffective. Auditor cannot rely on the entity’s internal controls. To describe: Relationship between tolerable rate and upper deviation rate.

Question

Want to see the full answer?

Answer 1

Question

Chapter 8, Problem 8.15MCQ

To determine

Introduction:

Tolerable Deviation Rate is defined as the maximum rate of acceptability of misstatement. It is the maximum possible variance accepted in audit sampling in order to rely upon a specific control.

Upper Deviation Rate is defined as sample deviation rate and an appropriate allowance for sampling risks.If the upper deviation limit is less than or equal to the tolerable rate, the sample results support reliance on the control procedures tested.

In this case, tolerable deviation rate i.e., 7% which is lower than upper deviation rate of 8% which clearly shows controls is ineffective. Auditor cannot rely on the entity’s internal controls.

To describe: Relationship between tolerable rate and upper deviation rate.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Cost of Trade Credit A large retailer obtains merchandise under the credit terms of 3/20, net 35, but routinely takes 65 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places. The answer is not 27.09 which is incorrect.

You invest $1,000 a year for 10 years at 6 percent and then invest $2,000 a year for an additional 10 years at 6 percent. How much will you have accumulated at the end of the 20 years? Answer: $49,967 *Please include all work & formulas

No ai please! What is the role of an underwriter in an IPO?A) To lend money to the companyB) To set the dividend policyC) To buy the securities and sell them to the publicD) To manage the company’s operations need he