When Conducting Substantive Tests, Sampling Risk Is _______

question 5

Multiple Choice

When conducting substantive tests, sampling risk is _______.

• A)ignored, due to substantive tests providing a compensating control
• B)considered to be the risk that the random sample selected will be representative of the population
• C)the risk that an auditor concludes that a material misstatement does not exist when it actually does, or an auditor concludes that a material misstatement exists when it actually does not
• D)the risk that an auditor concludes that a material misstatement does exist when it actually does, or an auditor concludes that a material misstatement exists when it actually does not

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Definitions:

Normal Distribution

A probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Security Returns

The gains or losses on an investment over a specific period, including dividends, interest, and capital gains, usually expressed as a percentage.

Standard Deviation

A statistical measure that quantifies the variation or dispersion of a set of data points or investment returns.

Arithmetic Return

The simple average of a series of periodic returns of an investment.