NM conducted a test of controls where the tolerable deviation rate was set at 6 percent and the expected population deviation rate was 3 percent. Using a sample size of 150, NM performed the planned test of controls. They found six deviations in the sample, and they calculated the completed upper deviation rate to be 7.8 percent.

Required

Assume that NM preliminarily assessed control risk as low. Given the results above, the auditor could decide to do one of three things: (1) increase the sample size, (2) increase the preliminary assessment of control risk, or (3) not adjust the preliminary assessment of control risk. Describe how NM could justify each of those three actions.