Homework Answers
Answer:
Question 24:
The auditor begins selecting controls to test by -- understanding the entity and the business and determining the risk of material fraud or error at the financial statement level.
Explanation:
When performing an integrated audit (to issue an opinion on the financial statements and an opinion on the ICFR) the auditor uses a top down approach to determine which controls to select (AS2201.21). The auditor begins by understanding the entity and the business and determining the risk of material fraud or error at the financial statement level. The auditor then focuses on entity level controls (the control environment, the strength of risk assessment and monitoring controls and ITGCs)
Question 25:
The tolerable deviation rate is the maximum rate of deviations from prescribed controls that an auditor is willing to accept and still use the planned assessed level of control risk.
Explanation:
When planning a particular audit sample for a test of controls, the auditor should consider the maximum rate of deviations from prescribed controls that would support his planned assessed level of control risk. The auditor should determine the maximum rate of deviations from the prescribed control that he would be willing to accept without altering his planned assessed level of control risk. This is the tolerable rate. (AS2315 Audit sampling).
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