When Performing the Substantive Tests on an Account Balance,the Auditor

question 43

Multiple Choice

When performing the substantive tests on an account balance,the auditor is concerned about two aspects of sampling-based decision errors: (1) the risk of incorrect rejection (RIR) and (2) the risk of incorrect acceptance (RIA) .Which of the following is true about RIR and RIA?

• A)RIR is of greater concern to the auditor than the RIA.
• B)RIA is of greater concern to the auditor than the RIR.
• C)RIA and the RIR are of equal importance to the auditor.
• D)Neither the RIR nor the RIA need be considered by the auditor.

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Definitions:

Level of Significance

Level of significance is a threshold in hypothesis testing, denoted as alpha, that determines the probability of rejecting the null hypothesis when it is true.

Chi-Squared Curve

A graphical representation of the chi-squared distribution, showing the probability of chi-squared values along the x-axis.

Degrees of Freedom

A statistical concept that defines the number of independent pieces of information in a dataset used in parameter estimates.

Population Variances

The measurement of how much the numbers in a specific population are spread out from their mean.