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. Such a situation illustrates the risk of:
A)incorrect rejection.
B)incorrect acceptance.
C)assessing control risk too high.
D)assessing control risk too low.

Question

Quizplus · Accepted Answer

Incorrect rejection occurs when an auditor concludes that a material misstatement exists in a financial statement assertion when, in fact, no such misstatement exists. This leads to potentially unnecessary additional work or adjustments that are not actually required.

While Performing a Substantive Test of Details During an Audit