Allowable risk of overreliance is the risk that the auditor is willing to take of accepting a control as effective, or a rate of monetary misstatements as tolerable, when the true population deviation rate is greater than the tolerable deviation rate.

Question

Quizplus · Accepted Answer

Allowable risk of overreliance refers to the level of risk that the auditor is willing to accept of misstatements going undetected. It means that the auditor is willing to accept a certain level of risk that a control is effective or a certain level of monetary misstatements is tolerable even if the true deviation rate is higher than the predetermined tolerable deviation rate. Therefore, the statement is true.

Allowable Risk of Overreliance Is the Risk That the Auditor