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prpnum1 prpnum1
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Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.
Textbook 

Auditing and Assurance Services


Edition: 17th
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Chintan13Chintan13
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After an audit test is performed and statistical results are calculated, the auditor must conclude either that the population is or is not materially misstated. ARIA is the statistical risk that the auditor has accepted a population that is, in fact, materially misstated. This is a serious concern to auditors because of the potential legal implications of concluding that an account balance is fairly stated when it is misstated by a material amount.

ARIR is the statistical risk that the auditor has concluded that a population is materially misstated when it is not. ARIR affects the auditors' actions only when they conclude that a population is not fairly stated. ARIR is important only when there is a high cost to increasing the sample size or performing other tests.

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