Which of the following is a 'Type 1' error in audit sampling?

Answer options:

Risk of incorrect acceptance.

Risk of assessing control risk too low.

Risk of incorrect rejection.

Risk of non-sampling error.

How to approach this question

Type 1 = Reject Good (Efficiency). Type 2 = Accept Bad (Effectiveness).

Full Answer

C.Risk of incorrect rejection.✓ Correct

The risk of incorrect rejection (substantive) or assessing control risk too high (controls) is a Type 1 error. It affects the efficiency of the audit because the auditor will perform unnecessary additional work.

Common mistakes

Confusing Type 1 and Type 2.

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