Mason Rowe is testing the effectiveness of an important control for Hart Inc. Rowe is placing a high level of reliance on this control and has assessed a relatively low risk of assessing control risk too low (5 percent) and tolerable rate of deviation (6 percent). Based on the acceptable risk of overreliance, expected population deviation rate, and tolerable rate of deviation, Rowe determined a sample size of 60 items. The tests of controls revealed three deviations.

Required:

1. Calculate the sample rate of deviation.
2. Using AICPA sample evaluation tables, calculate the upper limit rate of deviation and allowance for sampling risk.
3. Why does the upper limit rate of deviation differ from the sample rate of deviation?
4. What would Rowe's conclusion be with respect to the operating effectiveness of the control? What options are available at this time?
5. Ignoring the effects on sample size, how would Rowe's decision to accept a higher risk of assessing control risk too low (10 percent) affect the conclusions made with respect to the operating effectiveness of the control?