BU547 Lecture Notes - Lecture 17: Audit Risk, Audit Evidence, Financial Statement
Document Summary
Audit risk a measure of the level of risk the auditor is willing to accept that the financial statements may be materially misstated after the audit is completed and an unqualified audit opinion has been issued; see also audit assurance. Audit assurance a complement to audit risk; an audit risk of 2 percent is the same as audit assurance of 98 percent; also called overall assurance and level of assurance. The larger the operations, the more widely its statements will be used. Control risk a measure of the auditor"s assessment of the likelihood that misstatements exceeding materiality in a segment will not be prevented or detected by the client"s internal controls. Planned detection risk a measure of the risk that audit evidence for a segment will fail to detect misstatements exceeding materiality, should such misstatements exist; pdr = ar / (ir cr).
