Skip to content

CS Professional · Internal and Forensic Audit · Internal Audit Tools and Techniques

While testing payment controls at Narmada Steels Ltd, an internal auditor selects a sample of 60 payments and finds 3 deviations from the approval procedure. The tolerable deviation rate set was 4%. What is the sample deviation rate and the correct implication?

The sample deviation rate is 3 divided by 60, which is 5%. Because this exceeds the tolerable rate of 4%, the auditor cannot rely on the control as planned and should reduce reliance and extend further testing.

  1. A5%; it exceeds the tolerable rate, so control reliance is reducedCorrect
  2. B5%; it is below the tolerable rate, so the control can be relied on fully
  3. C3%; it exceeds the tolerable rate, so control reliance is reduced
  4. D3%; it is below the tolerable rate, so the control can be relied on fully

Explanation

Deviation rate = 3/60 = 5%. This exceeds the 4% tolerable rate, so the control cannot be relied on as planned and substantive work should increase. The 3% option wrongly uses the count as a percentage, and saying 5% is below 4% is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Internal Audit Tools and Techniques shows your real accuracy, how long you take and where you lose marks.

Practise Internal Audit Tools and TechniquesFree diagnostic mock

More Internal Audit Tools and Techniques questions