When making a decision about the dollar amount in an account balance based on a sample,the audit team considers the risk of incorrect acceptance more serious than the risk of incorrect rejection because
A) The incorrect rejection decision impairs the efficiency of the audit.
B) The audit team will do additional work and discover the misstatement of the incorrect decision.
C) The incorrect acceptance decision impairs the effectiveness of the audit.
D) Sufficient appropriate audit evidence will not have been obtained.

Question

Quizplus · Accepted Answer

The incorrect acceptance decision impairs the effectiveness of the audit because it means that the audit team would have accepted an account balance that contains a material misstatement. This could lead to a potential legal liability for the auditors and could affect the credibility of the financial statements. On the other hand, an incorrect rejection decision may impair the efficiency of the audit as the team may need to perform additional procedures to confirm the account balance. However, this does not have as significant of an impact on the overall effectiveness of the audit as an incorrect acceptance decision.

When Making a Decision About the Dollar Amount in an Account