In short
The allowance for sampling risk is the margin added to a sample result to reflect the chance that the sample isn't representative of the population, such as the gap between the sample deviation rate and the upper deviation limit.
Key takeaways
- The control is supported if the sample rate plus the allowance doesn't exceed the tolerable rate.
- For substantive tests, projected misstatement plus the allowance is compared with tolerable misstatement.
- Larger samples reduce the allowance.
Where it's tested
AUD: Audit Sampling — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
In a test of controls, the tolerable deviation rate is 5% and the computed upper deviation rate based on the sample is 6.2%. What should the auditor conclude?