When the _____ exceeds the _____,the audit team is exposed to the risk of incorrect acceptance.
A) upper limit on misstatements; tolerable misstatement
B) tolerable misstatement; expected misstatement
C) tolerable misstatement; upper limit on misstatements
D) upper limit on misstatements; expected misstatement

Question

Quizplus · Accepted Answer

Tolerable misstatement is the maximum amount of misstatement that the auditor can accept in the financial statements without modifying the opinion. The upper limit on misstatements is the maximum amount of misstatement that the auditor would allow in a particular population (such as a balance or transaction class) based on the auditor's assessment of inherent and control risks. If the upper limit on misstatements exceeds the tolerable misstatement, the audit team is exposed to the risk of incorrect acceptance, which means that they may not detect material misstatements in the financial statements. Therefore, choice C is the correct answer.

When the _____ Exceeds the _____,The Audit Team Is Exposed

When the _ Exceeds the _,The Audit Team Is Exposed