When Testing Controls, the Tolerable Error Is

question 36

Multiple Choice

When testing controls, the tolerable error is

• A) the tolerable rate of deviation that an auditor will accept before concluding that a control is effective.
• B) the minimum rate of deviation that an auditor will accept.
• C) the tolerable rate of deviation that an auditor will accept before concluding that a control is ineffective.
• D) the maximum amount of error in an account balance that an auditor will accept before concluding that an account is materially misstated.

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Definitions:

Consumer Credit

A financial arrangement that allows individuals to purchase goods or services now and pay for them in the future.

Trade Credit

A form of credit extended by suppliers to their customers, allowing them to purchase goods or services and pay for them at a later date.

Insufficient Credit

A condition where an individual or entity lacks the necessary borrowing capacity due to limited credit history or poor credit ratings.

Open Charge Account

A type of credit account that allows customers to make purchases up to a pre-approved limit and pay for them at a later date.