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 can be accepted by the auditor without affecting the decision-making of the users of financial statements. Upper limit on misstatements is the maximum amount of misstatement that the auditor is willing to accept in the population, with a specified level of confidence. If the upper limit on misstatement exceeds the tolerable misstatement, this means that the auditor is willing to accept more misstatement than what is considered acceptable, which increases the risk of incorrect acceptance. Therefore, C is the correct answer.

When the ___ Exceeds The___,the Audit Team Is Exposed to the Risk

When the _ Exceeds The_,the Audit Team Is Exposed to the Risk