the results are acceptable. Note that when using ACL, rounding is not a potential source for auditor error. 8-7
Chapter 08 - Audit Sampling: An Overview and Application to Tests Of Controls Using the ACL, the upper error limit frequency and the auditor’s decision for each control procedure are: Results using ACL Control Procedure 1 2 3 4 Number of deviations 4 2 2 0 Sample size 130 90 98 77 Upper error limit frequency 7.05 7.00 5.44 3.00 Auditor’s decision Does not support Does support Does not support Does support The evaluation using ACL does lead to different upper error limit frequencies and leads to clearer conclusions that control procedures 2 and 4 are acceptable. Because the tables require auditors to round sample size, the computed upper deviation rates derived from the tables seem to initially suggest that 2 and 4 are not acceptable (see note above). ACL provides the advantage that exact sample sizes can be evaluated. 8-29 Austen’s conclusion on each item would be as follows: 1. The sample deviation rate is 1.3% (1 75). Since the sample deviation rate is less than the expected population deviation rate of 2%, the control can be relied upon. 2. The sample deviation rate is 3.3% (1 30). Since the sample deviation rate exceeds the expected population deviation rate of 2.5%, the control cannot be relied upon. 8-30 a. The allowance for sampling risk in this situation is the difference between the sample deviation rate 4% (6/150) and the computed upper deviation rate of 7.8%. Therefore, the allowance for sampling risk included in the computed upper deviation rate is 3.8% (7.8% - 4%). We can determine that the desired level of confidence for Nathan’s tests must have been 95% because we find an upper deviation rate of 7.8% associated with a sample size of 150 and 6 deviations in table 8-8. b. (1) The tolerable deviation rate, 6%, is greater than the sample deviation rate, but is less than the computed upper deviation rate, 7.8%. Therefore, Mathews could increase the sample size and reevaluate the results based on the larger sample size before determining whether to adjust the preliminary control risk assessment. (2) Mathews could increase control risk because the upper deviation rate exceeds the tolerable deviation rate and the sample deviation rate exceeds the expected deviation rate. (3) Mathews could justify not adjusting the preliminary assessment because, even though the upper deviation rate exceeds the tolerable rate, the sample deviation rate from a relatively large sample is less than the tolerable rate and, upon further consideration, Mathews may determine that he can accept a higher tolerable rate than planned. However, he must recognize that this approach does not leave the allowance for sampling risk he originally planned. Looking at table 8-5 we see that the original sample size should have been 195 based on a tolerable deviation rate of 6% and an 8-8
Chapter 08 - Audit Sampling: An Overview and Application to Tests Of Controls expected population deviation rate of 3%.
- Fall '14
- deviation rate