When conducting substantive tests, sampling risk is the risk that an auditor concludes that a material misstatement does not exist when it actually does, or an auditor concludes that a material misstatement exists when it actually does not.

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This statement accurately describes sampling risk in the context of substantive testing. Sampling risk exists because auditors cannot test every single transaction or account balance, so they must rely on samples to draw conclusions about the population as a whole. Therefore, there is always a risk that the sample selected may not be truly representative of the entire population, leading to incorrect audit conclusions.

When Conducting Substantive Tests, Sampling Risk Is the Risk That