Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

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When evaluating a statistical sample of 50 documents with 3 deviations, how should the auditor proceed if the tolerable rate is 7%?

Modify the assessed level of control risk based on sample results
Accept the sample results as evidence for the controlled risk level
Increase the sample size for more accurate results
Consult with the client regarding controls

The correct answer is: Consult with the client regarding controls

In this scenario, the auditor is faced with 3 deviations out of a sample of 50 documents, which translates to a deviation rate of 6%. Given that the tolerable deviation rate is set at 7%, the sample results do not exceed the tolerable limit. Therefore, the next step for the auditor is to consult with the client regarding the internal control system that generated these deviations. This is a critical step because although the sample results fall within the tolerable rate, understanding the underlying reasons for the deviations helps assess potential risks and might call for improvements in the control processes. While the auditor could consider modifying the assessed level of control risk based on the sample results, engaging the client is important for a more comprehensive understanding of the control environment. The need to increase the sample size may arise if the deviations had been closer to or exceeded the tolerable rate, but since the tolerable rate is not exceeded in this instance, that action is not necessary at this time. Accepting the sample results outright without further consultation might overlook important insights about the client's controls that could influence the overall assessment of risk in future audits.