Question

As a result of tests of controls, an auditor incorrectly assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was?

1) more than the risk of assessing control risk too low based on the auditor's sample.
2) more than the deviation rate in the auditor's sample.
3) less than the risk of assessing control risk too low based on the auditor's sample.
4) less than the deviation rate in the auditor's sample.

Answer 1

The correct answer is that the auditor's mistake occurred because the true deviation rate in the population was more than the deviation rate in the auditor's sample, impacting the control risk assessment.

Step-by-step explanation:

The question the student asked pertains to an auditor's assessment during tests of controls in an auditing process. If the auditor incorrectly assessed control risk as too low and decreased substantive testing, this likely happened because the true deviation rate in the population was more than the deviation rate in the auditor's sample. This suggests that the auditor's sample was not representative of the actual population, leading to a mistaken assessment of control risk and the subsequent reduction in the amount of substantive testing.