An internal auditor s testing tor proper authorization of contracts and finds that the rate...

When the rate of deviations discovered in the sample equals the tolerable deviation rate, it means that the control is functioning at the level deemed acceptable by the auditor's predefined criteria. This does not necessarily imply that the control is flawless, but rather that its effectiveness meets the minimum standards set by the audit plan. Therefore, the internal auditor can conclude that the control is acceptably effective, but should also note the potential need for improvement.References:

The Institute of Internal Auditors (IIA) - Standards for the Professional Practice of Internal Auditing, Standard 2320 - Analysis and Evaluation

COSO Framework - Control Activities