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

Question

Quizplus · Accepted Answer

This situation illustrates the risk of incorrect acceptance, where the auditor accepts the account balance as not materially misstated when in fact it is materially misstated. This highlights the importance of the auditor evaluating the risk of incorrect acceptance and designing appropriate tests to minimize this risk.

While Performing a Substantive Test of Details During an Audit