The auditor's risk of concluding that the book value of inventory is correct when it is materially misstated is the risk of
A)incorrect rejection.
B)incorrect acceptance.
C)insufficient sample size.
D)none of the above.

Question

Quizplus · Accepted Answer

The risk of incorrect acceptance is the risk that the auditor will conclude that the book value of inventory is correct when it actually includes material misstatements. This can happen if the auditor's procedures fail to detect the misstatements or if the auditor misinterprets the results of the procedures. The risk of incorrect rejection, on the other hand, is the risk that the auditor will conclude that the book value of inventory is materially misstated when it is actually correct. Insufficient sample size may contribute to either of these risks, but it is not a separate risk itself.

The Auditor's Risk of Concluding That the Book Value of Inventory