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

When testing controls over authorisation of payments at Brightwater Co, the auditor selects a sample of 50 payments and finds 3 payments lacking authorisation. The tolerable deviation rate was set at 4%. Which conclusion is most appropriate under ISA 530?

The sample deviation rate is 6% against a 4% tolerable rate, so the results do not support the planned reliance on the control. The auditor should reassess the risk of material misstatement and likely perform more substantive procedures. The deviations are not anomalies without evidence that they are unrepresentative.

  1. AThe sample deviation rate of 6% exceeds the tolerable rate, so the auditor should consider that the sample does not support the planned reliance on the control and revise the risk assessment or approachCorrect
  2. BThe deviation rate is below the tolerable rate once sampling risk is ignored, so reliance on the control is supported
  3. CThe three deviations should be treated as misstatements and projected across the population of monetary values
  4. DThe deviations are anomalies and should be disregarded without further work

Explanation

3 of 50 is 6%, above the 4% tolerable rate, so the sample does not support the assessed control reliance. The auditor would typically increase the assessed risk of material misstatement and extend substantive testing. Deviations in control tests are not monetary misstatements, and treating them as anomalies requires a high degree of certainty that they are unrepresentative, which is not shown.

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