When the audit risk is 0.015,inherent risk is 0.50,control risk is 0.30 ,and analytical procedures risk is 0.50,the risk of incorrect acceptance is
A) 0.02.
B) 0.20.
C) 0.50.
D) 2.00.

Question

Quizplus · Accepted Answer

The risk of incorrect acceptance formula is:
Audit risk * Inherent risk * Control risk * Analytical procedures risk = Risk of incorrect acceptance
0.015 * 0.50 * 0.30 * 0.50 = 0.00225 or 0.22%.
Therefore, the risk of incorrect acceptance is 0.20 or B.

When the Audit Risk Is 0