Question

Sampling Risks

The two (2) types of sampling risks auditors face include the risk of incorrect acceptance and the risk of incorrect rejection. What do each of these mean and how will each impact the audit process and the audit results? Which do you consider the more important risk?

Answer 1

Answer:

Risk of incorrect acceptance :

• The risk of incorrect acceptance is a circumstance where the results of an audit sample support an end or a conclusion that a a/c balance is right, when this isn't generally the situation. Rather, the a/c balance is really materially incorrect. The result could be that the auditor leading the test gives a incorrect opinion with respect to a customer's fiscal summaries. The risk of inaccurate acceptance can be diminished by increasing the size of the sample.

Risk of incorrect rejection:

• The Risk of incorrect rejection:emerges when an sample shows that there is a risk of material error or material misstatement when this isn't actually the situation. A auditor experiencing this issue will grow the sample size or take part in other testing, however doing so diminishes the efficiency of the audit work. This hazard is a specific concern when the expense or trouble of getting additional audit proof is high .

Therefore,Risk of incorrect acceptance is significant than Risk of incorrect rejection.