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What is sampling risk and non-sampling risk? What are common sample selection methods? What is a representative sample? How does the confidence level relate to sampling? What factors affect sample size? What is tolerable misstatement and tolerable rate of deviation? What is stratification and why is it used? How do you evaluate the results of a control test sample? When is 100% testing or specific-item selection used instead of sampling? How does reliance on internal controls affect substantive sample sizes?
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Auditing & Assurance › Audit Sampling

What are the risks of over-reliance and under-reliance (for tests of controls)?

Intermediate

Answer

In tests of controls, the risk of over-reliance (or incorrect acceptance) is concluding controls are effective when they aren't—it affects audit effectiveness (a wrong opinion risk). The risk of under-reliance (incorrect rejection) is concluding controls are ineffective when they are—it affects efficiency (unnecessary extra work). Over-reliance is the more serious concern.
Real-world example Concluding a control works when it doesn't (over-reliance) could let a material misstatement pass—worse than doing extra testing.

Common follow-ups: Which risk threatens effectiveness? | Why is over-reliance the bigger concern?

Internal Controls Evaluation Audit Risk & Materiality Audit Sampling
All 18 Audit Sampling questions