While performing an audit of accounts receivable,Allen,CPA,found that the sample results supported the conclusion that the accounts receivable balance was materially misstated.However,the balance was,in fact,not materially misstated.This situation illustrates the risk of:
A)Incorrect rejection.
B)Incorrect acceptance.
C)Overreliance.
D)Underreliance.

Question

Quizplus · Accepted Answer

This situation is an example of an incorrect rejection, where the auditor concludes that there is a problem with the accounts receivable balance based on the sample results, but in reality, there is no material misstatement. This risk can occur when the sample size is too small, or the sampling methodology is flawed, leading to incorrect conclusions.

While Performing an Audit of Accounts Receivable,Allen,CPA,found That the Sample