If the Tolerable Rate of Deviation Is 6 Percent,the Acceptable

question 43

Multiple Choice

If the tolerable rate of deviation is 6 percent,the acceptable risk of overreliance is 5 percent,and the upper limit rate of deviation is 4.8 percent,which of the following statements is not true?

• A) The probability that the population deviation rate is more than 4.8 percent is 5 percent.
• B) The probability that the population deviation rate is less than or equal to 4.8 percent is 95 percent.
• C) The auditor would initially conclude that the internal control is not functioning as intended.
• D) The auditor has limited the exposure to the risk of overreliance to 5 percent.

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Definitions:

Cumulative Gain

The total amount of profit earned over a period of time, adding together successive gains from operations or investments.

Corridor Threshold

A term used in pension accounting that refers to the allowable range in fluctuation in the value of pension assets or liabilities; amounts outside this corridor may require amortization to keep the pension's accounting measures stable.

Pension Expense

The annual cost recognized by an employer for its contributions to employees' retirement plans, reflecting the cost of benefits earned by employees during the year.

Pension Funding

The process of allocating financial resources to a pension plan to meet future obligations to retirees.