- Sample deviation rate + Allowance for sampling risk > Tolerable rate
- bad result; cannot rely on control
- Sample deviation rate + Allowance for sampling risk < Tolerable rate
- good result; can rely on control
Definition:
- Upper deviation rate = sample deviation rate + allowance for sampling risk
- Tolerable rate of deviation = highest deviation rate the auditor could accept & still conclude that the design and operation of an internal control is effective
- used in drawing conclusion on effectiveness of control
- based on auditor judgment
- compared to upper deviation rate
- Sample deviation rate = (# of errors) / (sample size)
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