Risk of Incorrect Rejection occurs when an auditor incorrectly rejects an account assuming that the account is materially misstated, when in fact it is not materially misstated. This relates directly to the efficiency of the audit. Incorrectly rejecting accounts makes the auditor do more work by performing substantive procedures and substantive analytical procedures. An auditor usually makes this mistake when conducting audit sampling and the sample mistakenly identifies a material misstatement.
