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An auditor is performing attribute testing on a sample of 150 documents. The test results in 8 deviations from the control procedure. If the tolerable rate is 6%, the expected population deviation rate is 4%, and the allowance for sampling risk is 1%, the auditor will most likely
Auditors commonly use attribute sampling when performing tests of controls. This sampling plan allows them to search for deviations from control procedures. Before testing the control, auditors develop a tolerable deviation rate; this rate is the percentage of time a control can be violated but still be considered effective.
After testing the sample, the sample deviation rate is added to the allowance for sampling risk to calculate the upper precision limit (UPL). UPL is an estimate of the maximum deviation rate that likely exists within the entire population. When the UPL is above the tolerable rate, auditors conclude that the control is ineffective. In this scenario, calculations are as follows:
Because the UPL exceeds the tolerable rate, the control is considered ineffective and requires auditors to increase (or keep at maximum) the level of control risk.
Note: Expected population deviation rate (4%) is used to calculate sample size, not to evaluate results.
(Choice A) The tolerable rate is compared with the UPL, not added to the allowance for sampling risk.
(Choices B and C) The sample results would be rejected, not accepted, for reasons noted above.
Things to remember:
When evaluating results of an attribute sampling plan, auditors calculate the upper precision limit (UPL) by adding the sample deviation rate to the allowance for sampling risk. If the UPL exceeds the tolerable rate, the control is deemed ineffective, and control risk is increased or kept at maximum.
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