Question

Required information [The following information applies to the questions displayed below.] The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Explain how these components are interrelated.

Answer 1

Audit risk is the risk that an auditor may give an inappropriate opinion on financial information that is materially misstated.audit risk is a function of the risk of material misstatement and detection risk.for example ,an auditor may give an unqualified opinion on financial statements without knowing that they are materially misstated . Such risk may exist at overall level or while varifaying various transaction and balance sheet item.the assessment of risk is based on audit procedures to obtain information necessary for that purpose and evidence obtained throughout the audit.

The auditor obtain reasonable assurance by obtaining sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.materiality and audit risk are considered throughout the audit. In a particular ,when:

Identifaying and assessing the risk of material misstatement

Determining the nature timing and extent of audit procedures and

Evaluating the effect of uncorrected misstatements,if any on the financial statements and in forming an opinion onon the auditors report