While performing a substantive test of details during an audit, the auditor determines that the sample results support the conclusion that the recorded account balance is materially misstated.It is, in fact, NOT materially misstated.This situation illustrates the risk of:
A) assessing control risk too low.
B) assessing control risk too high.
C) incorrect rejection.
D) incorrect acceptance.

Question

Quizplus · Accepted Answer

This situation illustrates the risk of incorrect rejection, where the auditor concludes that the recorded account balance is materially misstated based on the sample results, but in reality, it is not. This may happen due to factors such as sampling error, inappropriate sample selection, or failure to consider relevant evidence. Incorrect rejection increases the risk of audit failure, as the auditor may determine that there is a material misstatement in the financial statements when there is none.

While Performing a Substantive Test of Details During an Audit