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CMA Intermediate · Corporate Accounting and Auditing · Audit Sampling, Audit Techniques and Analytical Procedure

Using a CAAT, an auditor tests a random sample of 60 sales invoices for a control and finds 6 deviations, while the tolerable deviation rate was set at 5%. As per SA 530, what is the appropriate way to view this result?

The sample deviation rate is 10%, above the 5% tolerable rate. SA 530 says an unexpectedly high deviation rate may lead to an increase in assessed risk of material misstatement unless further evidence supports the initial assessment. Using software to select the sample does not eliminate sampling risk.

  1. AIgnore it, since software selection removes sampling risk
  2. BTreat the sample deviation rate of 10% as unexpectedly high, which may lead to an increase in the assessed risk of material misstatement unless further evidence supports the initial assessmentCorrect
  3. CConclude the control is effective because only 6 items failed
  4. DReduce the sample size to confirm the result

Explanation

Deviation rate = 6/60 = 10%, double the tolerable 5%. SA 530 notes that an unexpectedly high sample deviation rate may lead to an increase in the assessed risk of material misstatement unless further audit evidence substantiating the initial assessment is obtained. Software selection does not remove sampling risk.

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