When the auditor concludes that the account balance is not materially misstated when,in fact,it is materially misstated,the auditor has committed the
A) risk of assessing control risk too high.
B) risk of assessing control risk too low.
C) risk of incorrect acceptance.
D) risk of incorrect rejection.

Question

Quizplus · Accepted Answer

The risk of incorrect acceptance occurs when the auditor concludes that the account balance is not materially misstated and accepts the financial statements as being fairly stated, when in fact they are materially misstated. This may occur due to errors or fraud, or due to limitations in the audit procedures performed. The risk of incorrect rejection, on the other hand, occurs when the auditor concludes that the account balance is materially misstated and issues a qualification, when in fact the balance is not material. This may result in unnecessary cost or consequences for the client. The risks of assessing control risk too high or too low relate to the effectiveness of internal controls over a financial statement assertion, and may impact the nature, timing, and extent of substantive testing required.

When the Auditor Concludes That the Account Balance Is Not