Question

The auditor tested a sample of recorded sales invoices for evidence of credit approval. Based on...

The auditor tested a sample of recorded sales invoices for evidence of credit approval. Based on the results of the sample, the auditor concluded that there was a satisfactory rate of approvals. Unknown to the auditor, credit approvals in the population were not satisfactory. This would be an example of:
A. Risk of assessing control risk too low
B. Risk of assessing control risk too high
C. Risk of incorrect acceptance
D. Risk of incorrect rejection

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Answer #1

A. Risk of assessing control risk is too low.

(The risk of assessing control risk is too low is the risk that the assessed level of control risk based on sample is less than the true operating effectiveness of control.The risk of assessing control risk is too low when the auditors sample indicate the control is functioning effectively when, in fact it is not. The type of risk is more concern to the audit team because it may eventually result in issuance of unqualified opinion on financial statement are materially misstated.)

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