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 is the maximum amount of misstatement that the auditor can accept and still be willing to conclude that the account balance is fairly presented. The risk of incorrect acceptance is the risk that the auditor will accept an account balance that is materially misstated. In this case, the upper misstatement limit is $11,200, which means that the auditor is willing to accept a misstatement of up to that amount. 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. Therefore, the best choice is D.

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