In a monetary-unit sampling plan, the upper misstatement limit is $11,200 and the risk of incorrect acceptance is 5%. This means that:
A)tolerable misstatement is $11,200.
B)there is a 95% chance that the actual misstatement in the account is $11,200 or more.
C)there is a 95% chance that the actual misstatement in the account is $11,200.
D)there is a 95% chance that the actual misstatement in the account is $11,200 or less.

Question

Quizplus · Accepted Answer

The upper misstatement limit represents the maximum amount of misstatement that the auditor is willing to accept without altering the opinion on the financial statements. Therefore, if the actual misstatement in the account is below this limit, the auditor will still issue an unqualified opinion. The risk of incorrect acceptance is the auditor's willingness to accept a sample result as representative of the entire population, even though the population may contain material errors. In this case, the risk of incorrect acceptance is 5%, which means that there is a 95% chance that the actual misstatement in the account is $11,200 or less.

In a Monetary-Unit Sampling Plan, the Upper Misstatement Limit Is