In the *uation of this sample, the auditor decided to increase the level of the preliminary assessment of control risk because the
a. Tolerable rate (7%) was less than the achieved upper precision limit (8%).
b. Expected deviation rate (7%) was more than the percentage of errors in the sample (3 1/2%).
c. Achieved upper precision limit (8%) was more than the percentage of errors in the sample (3 1/2%).
d. Expected deviation rate (2 1/2%) was less than the tolerable rate (7%).
Answer:A
(a) The requirement is to determine the circumstance in which an auditor would decide to increase the level of the preliminary assessment of control risk. Answer (a) is correct because the assessment of control risk will increase when the achieved upper precision limit (here 8%) exceeds the tolerable rate (here 7%). Answer (b) is incorrect because the expected deviation rate was 2 1/2%, not 7%. Also, if the expected deviation rate is higher than the percentage of error in the sample, the preliminary assessment does not need to be increased. Answer (c) is incorrect because the achieved upper precision limit will always exceed the percentage of errors in the sample. Answer (d) is incorrect because, in circumstances in which the auditor decides to sample the population, the expected deviation rate will always be less than the tolerable rate.