When Determining Tolerable Exception Rate (TER)

question 103

Multiple Choice

When determining tolerable exception rate (TER) ,

• A) the auditor considers the degree of reliance to be placed on the control and the significance of the control to the audit.
• B) if only one internal control is used to support a low control risk assessment for an objective, TER will be higher for the attribute than if multiple controls are used to support a low control risk assessment for the same objective.
• C) control deviations increase both the risk of material misstatements in the accounting record, and will always result in misstatements.
• D) a smaller sample size is needed for a low TER than for a high TER.

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Definitions:

Exchange Rate

The exchange rate reflecting the value of one currency compared to another.

Spot Exchange Rate

This is the current exchange rate at which two currencies can be exchanged immediately.

Eurocurrency

Currency deposited by national governments or corporations in banks outside their home market, primarily used for lending, borrowing, and investing internationally.

Political Risk

The risk of losing money due to political instability or changes in government policy affecting an investment.