The risk the auditor is willing to take of accepting a balance as correct when the true error in the balance is greater than the tolerable misstatement is the:
A) lower bound.
B) allowable risk of incorrect acceptance.
C) tolerable risk.
D) upper bound.

Question

Quizplus · Accepted Answer

Allowable risk of incorrect acceptance refers to the maximum risk that the auditor is willing to take of accepting a balance as correct when, in fact, the true error in the balance exceeds the tolerable misstatement. It is often expressed as a percentage or a dollar amount. The auditor uses this concept in assessing the risk of material misstatement and determining the sample size for substantive testing. The lower bound and upper bound are not related to this concept, and tolerable risk refers to the maximum amount of error that the auditor is willing to accept in financial statements.

The Risk the Auditor Is Willing to Take of Accepting