Question 2 Audit Evidence, Assertions, and Sampling - 20 marks (a) Describe the difference between tolerable rate of deviation and tolerable misstatement. Explain the effects of a decrease in the tolerable rate of deviation. (5 marks) (b) You are auditing accounts receivable. The majority of the clients customers are in India and other parts of remote South-East Asia. These customers have large account balances, of which 40% have been outstanding for more than 6 months. (i) If confirmation is used, what form of confirmation should it be? Justify your choice. (5 marks) (ii) Explain whether the results from the confirmation can be used to verify accuracy, valuation and allocation assertion of accounts receivable. Suggest an alternative procedure, if any. (5 marks) (iii) Because of communication difficulties, direct confirmation of the accounts receivables balances is unlikely to give satisfactory results. Describe one audit procedure you would perform to verify the existence of these customers debts. (5 marks)