The auditor selects 25 invoices for testing and detects no errors. As a result, she concludes that the expense account is fairly stated. Unbeknown to the auditor, the client has altered some of the invoices to reduce the amount reported as expense. This is an example of:
A) an efficiency problem.
B) incorrect acceptance.
C) a sampling error.
D) Both b and c.

Question

Quizplus · Accepted Answer

This is an example of incorrect acceptance because the auditor concluded that the expense account was fairly stated based on the testing of 25 invoices, but some of them were altered by the client. This is also a sampling error because the auditor did not select invoices that were representative of the population of invoices, which resulted in the failure to detect the altered invoices.

The Auditor Selects 25 Invoices for Testing and Detects No