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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Evidence and testing considerations

In testing a control over approval of payments at Orlan Ltd, the auditor selected 60 payments and found 2 without approval. The tolerable deviation rate was set at 5%. The auditor's projected sample deviation rate is therefore 3.3%. What is the most appropriate conclusion under ISA 530?

The auditor should recognise that the 3.3% sample deviation rate is below the 5% tolerable rate but still subject to sampling risk. Because the true population rate could exceed tolerable, the auditor must judge whether reliance is justified or extend testing.

  1. AThe sample rate is below tolerable rate, but sampling risk means the auditor must consider whether the true rate might exceed 5% before relying on the controlCorrect
  2. BThe control is effective because 3.3% is below 5%, so no further consideration is needed
  3. CThe control is ineffective because any deviation means the control failed
  4. DThe deviations are anomalies and should be ignored

Explanation

2/60 = 3.3%, below the 5% tolerable rate, but the sample rate is only an estimate. ISA 530 requires consideration of sampling risk: if the sample rate is close to tolerable, there is an unacceptable risk the population rate exceeds it, so reliance may need reconsideration or extended testing. Treating deviations as anomalies requires high certainty that they are not representative.

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