An increase in the tolerable misstatement has what effect on the planned allowance for sampling risk?
A) Increases.
B) Decreases.
C) No effect.
D) Indeterminate.

Question

Quizplus · Accepted Answer

An increase in the tolerable misstatement means that the auditor is willing to accept a higher level of risk that the financial statements are materially misstated. This, in turn, means that the auditor can reduce the planned allowance for sampling risk, as they are less concerned about the risk of failing to detect a material misstatement.

An Increase in the Tolerable Misstatement Has What Effect on the Planned