An auditor will most likely estimate the tolerable failure rate in order to:

• A. Determine the appropriate sample size.
• B. Determine which type of sampling approach to use.
• C. Calculate the probable control risk.
• D. Determine the population to be tested.

Answer: (A)

The key idea is that tolerable failure rate guides how much evidence you need when testing controls. In tests of controls, auditors use sampling to judge whether a control is operating effectively. The tolerable failure rate is the maximum deviation from the control that the auditor is willing to accept in the population without concluding the control is ineffective. This rate, together with the expected deviation rate and the desired confidence level, determines the sample size: a lower tolerable rate means a larger sample to detect deviations with sufficient assurance, while a higher tolerable rate allows a smaller sample. The population and the sampling approach are planned separately, and the overall assessment of control risk comes from evaluating the resulting evidence rather than being set directly by the tolerable rate.