Question: The diagram below depicts the auditor's estimated maximum deviation rate compared with the tolerable rate, and also depicts the true population deviation rate compared with

The diagram below depicts the auditor's estimated maximum deviation rate compared with the tolerable rate, and also depicts the true population deviation rate compared with the tolerable rate. Auditor's True state of population estimate Deviation rate Deviation rate based on is less than exceeds sample results tolerable rate tolerable rate Maximum deviation rate is less than Ill. tolerable rate Maximum deviation rate exceeds 11. IV. tolerable rate As a result of tests of controls, the auditor assesses control risk higher than necessary and thereby increases substantive testing. This is illustrated by situation: O I. O II. O III. O IV

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