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.The susceptibility of an assertion in an account or disclosure to a misstatement before consideration of any related controlsInherent riskThe risk that a misstatement that could occur will not be prevented, or detected and corrected, on a timely basis by the entity’s internal control.Control riskThe risk that the procedures performed by the auditor will not detect a misstatement that could be material.Detection riskc. Explain how these components are interrelated.

The objective of the question is to understand the interrelationship between the three components of…

Answered: The auditor should consider audit risk…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.

The susceptibility of an assertion in an account or disclosure to a misstatement before consideration of any related controls	Inherent risk
The risk that a misstatement that could occur will not be prevented, or detected and corrected, on a timely basis by the entity’s internal control.	Control risk
The risk that the procedures performed by the auditor will not detect a misstatement that could be material.	Detection risk

c. Explain how these components are interrelated.

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