Skip to content

ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

Karolus Co's auditor tests 80 purchase invoices for evidence of authorisation as a test of controls. The tolerable rate of deviation is 5%. The sample reveals 6 invoices with no authorisation (a 7.5% sample deviation rate). No other information indicates the control is operating effectively. What is the most appropriate conclusion under ISA 530?

The 7.5% deviation rate exceeds the 5% tolerable rate, so the auditor cannot conclude the control is operating effectively. The auditor should reassess control risk and perform more substantive procedures, unless additional testing supports reliance. Deviations cannot be dismissed as anomalies merely because they cluster in one month.

  1. AThe sample deviation rate exceeds the tolerable rate, so the auditor should conclude that the control is not operating effectively and should increase substantive testing unless further work supports relianceCorrect
  2. BThe control can be relied upon because the sample is only 80 items
  3. CThe auditor should extrapolate the deviations and reduce substantive procedures
  4. DThe deviations should be ignored as anomalies because they were all found in one month

Explanation

The sample deviation rate of 7.5% exceeds the 5% tolerable rate, so the sample provides unsatisfactory evidence for reliance on the control. The auditor should revise the risk assessment and extend substantive procedures. Treating the errors as anomalies requires high certainty that they are not representative, which a clustering in one month does not give.

Did you get it right without looking?

One question tells you little. A timed set on Audit procedures and obtaining evidence shows your real accuracy, how long you take and where you lose marks.

Practise Audit procedures and obtaining evidenceFree diagnostic mock

More Audit procedures and obtaining evidence questions