What is Risk of overreliance and of incorrect acceptance?
In short
In tests of controls, the risk of overreliance is that a sample supports more reliance on a control than its true operating effectiveness justifies. In substantive tests, the risk of incorrect acceptance is that a sample supports a balance that is materially misstated.
Key takeaways
- Both relate to audit effectiveness, the more serious concern.
- The opposite risks, underreliance and incorrect rejection, relate to efficiency and lead to extra work.
- Lowering the acceptable risk increases sample size.
Where it's tested
AUD: Audit Sampling — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
In a test of controls, the tolerable deviation rate is 5% and the computed upper deviation rate based on the sample is 6.2%. What should the auditor conclude?