In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations. The auditor most likely would give broader consideration to the implications of a deviation if it was:
a. Caused by an employee's misunderstanding of instructions.
b. The only deviation discovered in the sample.
c. Initially concealed by a forged document.
d. Identical to a deviation discovered during the prior year's audit.
Choice "c" is correct. The auditor should consider both the qualitative and the quantitative aspects of deviations in tests of controls. Qualitative aspects might include whether deviations are indicative of an error or fraud. Such an evaluation is important because fraud is intentional, has implications beyond the direct monetary effect, and requires consideration of the implications for other aspects of the audit. Thus, a deviation initially concealed by a forged document is very serious and deserves broader consideration than a deviation of the same dollar amount due to an error.
Choice "b" is incorrect. The fact that a deviation was the only one discovered would have no importance beyond its impact on the computation of the upper deviation rate.
Choice "d" is incorrect. Discovery of a deviation identical to one discovered during the prior year's audit is not necessarily cause for additional concern.
Choice "a" is incorrect. Employee misunderstanding of instructions is an inherent limitation of internal control and is not necessarily cause for concern.