When the Computed Upper Deviation Rate Is Greater Than the Tolerable

question 34

Multiple Choice

When the computed upper deviation rate is greater than the tolerable deviation rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to defend if the auditor is ever subject to review by a court?

• A) Revise and relax the tolerable deviation rate (TDR) or the acceptable risk of assessing control risk too low (ARO).
• B) Write a letter to management.
• C) Expand the sample size.
• D) Revise the assessed control risk.

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Definitions:

Raw Materials Account

An account used to track the cost of raw materials not yet used in production in a company's inventory.

Ending Balance

The amount of money remaining in an account at the conclusion of a time period, after all additions and subtractions have been accounted for.

Work in Process Account

An account used in the manufacturing process to track the costs associated with production that is not yet completed, including labor, materials, and overhead.

Ending Balance

The final amount in an account at the end of a period, after all additions and subtractions have been accounted for.