When the Computed Upper Deviation Rate Is Greater Than the Tolerable

question 142

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

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Definitions:

Decision-Making Units

Groups or individuals within an organization that have the authority and responsibility to make choices that affect organizational outcomes.

Positive Economics

An approach to economics that seeks to understand behavior and the operation of systems without making judgments. It describes what exists and how it works.

Normative Economics

An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. Also called policy economics.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.