[Soproudofmyself]

I got this question through Becker:

Question:

As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was:

Answer:

More than the deviation rate in the auditor’s sample

I dont understand why you would decrease substantive testing if your “true deviation” was higher than the deviation rate in the sample.

I would think that you would increase substantive testing because your true deviation rate was higher than expected…wouldn’t you want to get more comfort from substantive testing then?

[LisaCPAPlease]

I believe they're asking what caused the assessment of control risk to be too low (ie lower than the actual level of control risk). If the deviation rate in the sample is lower than the true deviation rate, then control risk will be assessed too low which will cause detection risk to increase and substantive testing to decrease. The wording is tricky, hope that makes sense.

FAR - 94 (5/2/11)
AUD - 92 (7/1/11)
BEC - 82 (8/25/11)
REG - 84 (11/21/11)

[Soproudofmyself]

thanks lisa! the questions are tricky…..I'm setting myself up for failure if i keep reading them wrong….freaking out..dont think I gave myself enough time to study for AUD =(

[kb24]

This is a perfect example of why you need to do lots of MCQ for AUD in order to become familiar with the tricks and wording that you might see.

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[rknight21]

yes this is how confusing some of these questions can get. Lisa explained it well i believe.

to go a little deeper, deviation is as a result of attribute sampling which is done for testing controls. if this deviation is high or put differently controls are weak(control risk is high) then detection risk can be assessed at low and reduce substantive test.

you must remember it is always an inverse relation…

[Anonymous]

This question caused my brain to spin too that led me to this link while searching for a clearer explanation of what really deviation rate means.

What does TRUE DEVIATION RATE mean?

Is true deviation rate = upper deviation rate?

Is true deviation rate = tolerable deviation rate?

Is true deviation rate = expected deviation rate?

[Jzjac]

True Deviation = The actual deviation rate of the full population.

It is not the tolerable deviation rate because the tolerable rate of deviation is what the auditor will tolerate until he/she has to change the assessed level of risk.

It is not the expected deviation rate because that is the rate of deviation that the auditor expects lol

And upper deviation rate is the [actual sample deviation rate of the sample+ allowance for sampling risk]

BEC - Passed!
FAR - Passed!
AUD - Passed!
REG - Passed!

[Anonymous]

@Jzjac, thanks for explaining them one by one, despite you laughing at me. LOL

I thought true deviation rate is a “secret” that auditor has not uncovered until he realizes its existence later in his audit work. Just kidding. I know I am being silly. Auditing is nuts so am I.

[Author]

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