When the Computed Upper Exception Rate Is Greater Than the Tolerable

question 102

Multiple Choice

When the computed upper exception rate is greater than the tolerable exception rate, it is necessary for the auditor to take specific action.Which of the following courses of action would be most difficult to justify?

• A)Reduce the tolerable exception rate so as to accept the sample results.
• B)Expand the sample size and perform more tests.
• C)Revise the assessed control risk.
• D)Write a letter to management which outlines the control deficiencies.

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Definitions:

Operating Activity

Activities that constitute the primary or core business functions, including sales and service provision, and their related expenses, generating most of the company's cash flows.

Cash Flows

Cash flows refer to the movement of money into and out of a business, indicative of its liquidity, operational efficiency, and financial health.

Cash Receipts

Cash receipts refer to the collection of money, including checks, cash, and credit card charges, received by a business for goods or services it has sold.

Cash Payments

Money that is paid out by a business, often for expenses, debt, or purchases.