Question

After extrapolating the results of performing substantive tests on a sample of accounts from the accounts receivable subsidiary ledger, Allen CA concluded that the accounts receivable balance was materially misstated. In fact, the balance was materially correct. This situation illustrates the risk of:A.Incorrect rejection.B. Incorrect acceptance.C. Assessing control risk too low.D. Assessing control risk too high

Answer 1

Answer: A. Incorrect rejection

Explanation:

INCORRECT REJECTION, in accounting, is the risk the sample supports the conclusion that the recorded balance is materially misstated when it is not materially misstated.