Upper Deviation Rate is the sum of all the samples taken by the auditor and addition of allowance for sampling risk. If the upper deviation limit is less than or equal to the tolerable rate, the sample results support reliance on the control procedures tested. Allowance for Sampling Risk can be defined as uncertainties associated with sampling. It is the difference between tolerable deviation and mean of population. Tolerable Deviation Rate is the maximum deviation that an auditor is willing to accept so as to rely upon a specific control. It is inversely proportional to the sample size . It is the maximum possible variance accepted in audit sampling in order to rely upon a specific control. If control risk is increasing, it clearly brings out that actual population deviation rate (actual deviation) is higher than deviation computed by auditor that is the upper deviation set by him. Substantive Testing shows that although actual population rate exceeds upper deviation rate but it doesn’t mean that it exceeds tolerable deviation rate and auditor cannot rely upon it totally. To describe: Expected population deviation and tolerable deviation rate relationships.

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Chapter 8, Problem 8.17MCQ

To determine

Introduction:

Upper Deviation Rate is the sum of all the samples taken by the auditor and addition of allowance for sampling risk. If the upper deviation limit is less than or equal to the tolerable rate, the sample results support reliance on the control procedures tested.

Allowance for Sampling Risk can be defined as uncertainties associated with sampling. It is the difference between tolerable deviation and mean of population.

Tolerable Deviation Rate is the maximum deviation that an auditor is willing to accept so as to rely upon a specific control. It is inversely proportional to the sample size. It is the maximum possible variance accepted in audit sampling in order to rely upon a specific control.

If control risk is increasing, it clearly brings out that actual population deviation rate (actual deviation) is higher than deviation computed by auditor that is the upper deviation set by him.

Substantive Testing shows that although actual population rate exceeds upper deviation rate but it doesn’t mean that it exceeds tolerable deviation rate and auditor cannot rely upon it totally.

To describe: Expected population deviation and tolerable deviation rate relationships.

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