(solution) (B) What is the relationship between the tolerable error and the expected rate of errors for a...

(B) What is the relationship between the tolerable error and the expected rate of errors for a test of a control? Tolerable error means the maximum error in a population that the auditor is willing to accept. Choice (A) is bogus because if the tolerable error rate is less than the expected rate, the auditor would not plan to rely on internal control and would therefore omit tests of controls. Choice (C) is a loser because testing of controls is inappropriate if the expected rate of errors equals the tolerable error rate (mathematically, in this case, the sample size would equal the population size). Choice (D) is off the mark because to perform tests of controls one must assume that the tolerable rate of deviations is more than the expected error rate.  

 

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