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What is acceptable risk of overreliance?
acceptable risk of overreliance. The risk that the auditor is willing to take of accepting control as effective or a rate of monetary misstatements as tolerable when the true population exception rate is greater than the tolerable exception rate.
What is the risk of overreliance?
The risk of overreliance (risk of assessing control risk too low) occurs when the auditor's sample indicates that the control is functioning effectively when, in fact, it is not. When this risk occurs, the auditor's upper limit rate of deviation is less than the tolerable rate of deviation.
When the auditor decides to select less than 100 percent of the population for testing the auditor is said to use?
random sample. When the auditor decides to select less than 100 percent of the population for testing, the auditor is said to use: a. audit sampling.
What is Are in auditing?
In accounting, ARE stands for asset retirement obligations, a policy created by the Financial Accounting Standards Board, or FAST, in June 2001. The agency has established statements of financial accounting standards, or SEAS, to guide private company's financial-reporting practices since 1973.
What is tolerable exception rate?
Definition. (Tolerable Exception Rate) The exception rate that the auditor will permit in the population and still be willing to conclude the control as operation effectively and/or the amount of monetary misstatements in the transactions established during planning is acceptable.
What is tolerable rate?
Tolerable rate. The maximum population deviation rate the auditor is willing to accept without altering the planned assessed level of control risk. For example, a low (37%) rate might be used if substantial reliance on the control is planned. The tolerable rate is inversely related to sample size.
What is tolerable error?
In substantive procedures, the tolerable error is the maximum monetary error in an account balance or a class of transactions that auditors would be willing to accept so that when the results of all audit procedures are considered, auditors are able to conclude, with reasonable assurance, that the financial statements
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