Audit Risk (1)

Question 1

What is done in order to obtain reasonable assurance that financial statements are free from material misstatement?

Answer 1

Auditor shall obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level

Question 2

What does this audit evidence enable?

Answer 2

Auditor to draw reasonable conclusions on which to base the auditor’s opinion

Question 3

What is the audit risk?

Answer 3

Risk that the auditor expresses an inappropriate audit opinion when financial statements are materially misstated

Question 4

Audit risk component (entity)

Answer 4

One is dependent on the entity and risk of material misstatement arising in the financial statements

(inherent and control risk)

Question 5

Audit risk component (auditor)

Answer 5

One is dependent on the auditor and risk that the auditor will not detect material misstatements in FS

(detection risk)

Question 6

What is contained in the audit risk model?

Answer 6

Inherent risk * Control risk * Detection risk

Question 7

What is included in the detection risk?

Answer 7

Sampling risk
Non-sampling risk