I have been looking at various dac units and there is one thing I have noticed. Some dacs, a lot of the higher rated ones in fact, basically have no display. They have a power light and some lights to tell which input you are using and that is about it, I am talking about units like the Bifrost, and Zdac. Next you have the units which have a series of lights that will show you what sampling rate the incoming data is at, such as the Dacmagic and others. Then there are the units like the Emotiva XDA-2 which have an actual digital display of some type which shows inputs, volume levels, sampling rate ect. If I were to get one of the units like the Zdac or others which have no easy way of knowing what the incoming data was, is there some other way of determining it? It seems to me that either an led or digital display would give you some real useful information that some of these other units don't tell you. If I thought I was listening to a 24/96 file, but didn't have windows or my music player set correctly and was in fact receiving 16/44.1 I wouldn't readily know it would I?
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Correct to all you wrote.
In some cases, if the conversion from 96k to 44.1 was done by the OS in a very poor way, the sound might be audibly bad, that's about it.
Many people, however, use a player of some kind that adjusts the output to the same rate as the track being played to avoid this, regardless of the DAC being used. Where the DAC doesn't support the sample rate of the song (eg: 88.2 and 176.4 are sometimes not supported by some DACs) various players will use high-quality conversion.