CHAPTER 8 - CHAPTER 8 8-2 Type I and Type II errors are the...

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CHAPTER 8 8-2 Type I and Type II errors are the two types of decision errors an auditor can make when deciding that sample evidence supports or does not support a test of controls or a substantive test based on a sampling application. In reference to a test of controls, Type I and Type II errors are: Risk of incorrect rejection (Type I) : the risk that the assessed level of control risk based on the sample is greater than the true operating effectiveness of the control. Also commonly referred to as the risk of assessing control risk too high or the risk of underreliance. Risk of incorrect acceptance (Type II) : the risk that the assessed level of control risk based on the sample is less than the true operating effectiveness of the control. Also commonly referred as the risk of assessing control risk too low or the risk of overreliance. In reference to substantive tests, Type I and Type II errors are as follows: Risk of incorrect rejection (Type I) : the risk that the sample supports the conclusion that the recorded account balance is materially misstated when it is not materially misstated. Risk of incorrect acceptance (Type II)
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This note was uploaded on 11/29/2009 for the course AMIS 627 taught by Professor Johnson during the Spring '08 term at Ohio State.

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CHAPTER 8 - CHAPTER 8 8-2 Type I and Type II errors are the...

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