The Risk of Incorrect Rejection and the Risk of Underreliance

question 37

Multiple Choice

The risk of incorrect rejection and the risk of underreliance relate to the

• A) Effectiveness of the audit.
• B) Efficiency of the audit.
• C) Preliminary estimates of performance materiality.
• D) Tolerable misstatement.

---

Definitions:

Intended Beneficiary

An individual or entity explicitly chosen to benefit from a contract, even though they are not a direct party to the agreement.

Incidental Beneficiary

A third party who benefits from a contract between two other parties, even though the benefit was not the contract’s primary purpose or intention.

Courts

Judicial institutions authorized to hear and resolve disputes, applying the law to specific cases.

Tests

Procedures or measures used to assess various attributes or performance often in educational, scientific, or medical contexts.