While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. It was, in fact, not materially misstated. This situation illustrates the risk of:
A) incorrect acceptance.
B) incorrect rejection.
C) assessing control risk too high.
D) assessing control risk too low.

Question

Quizplus · Accepted Answer

This situation illustrates the risk of incorrect rejection, where the auditor incorrectly concludes that the recorded account balance is materially misstated when in fact it is not. This can occur when there are errors or biases in the sample selection or testing methodology. The risk of incorrect acceptance would be the opposite scenario, where the auditor concludes that the recorded account balance is not materially misstated when it actually is. Assessing control risk too high or too low would not be directly related to this situation of a misstated account balance.

While Performing a Substantive Test of Details During an Audit