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%.

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