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Evidence

5.5 Evaluating deviations and misstatements in a sample

Deviations

Any issues identified during a test of control are called deviations.

If the actual deviation rate exceeds the tolerable deviation rate (i.e. the rate the
auditor is willing to accept), the risk of material misstatement is greater and more
substantive procedures will be required.

Misstatements

Any issues identified during a test of detail are called misstatements.

Anomalies (isolated errors) can be ignored as the misstatement is not representative
of the population.

If the auditor believes the misstatement could be representative of further
misstatements the auditor will project the misstatement across the population as a
whole.

If the total projected misstatement in the sample is less than tolerable misstatement
no further testing will be required.

If the total projected misstatement in the sample exceeds tolerable misstatement the
auditor will extend the sample.

Tolerable misstatement: A monetary amount set by the auditor in
respect of which the auditor seeks to obtain an appropriate level of
assurance that the monetary amount set by the auditor is not exceeded
by the actual misstatement in the population.

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