The risk of material misstatement is made up of two components inherent risk and control risk. Detection risk is affected by sampling and non-sampling risk. Type the following paragraphs into the word processing sheet:Īuditor’s risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.Īuditor’s risk is a function of two main components being the risks of material misstatement and detection risk.ĭetection is the risk that the procedures performed by the auditor to reduce the auditor’s risk to an acceptably low level will not detect a misstatement that exists and which could be material, either individually or when aggregated with other misstatements.
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