Auditing: A Risk Based-Approach to Conducting a Quality Audit
Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Chapter 7, Problem 4TFQ
To determine

Introduction: When there is a material misstatement in the financial statements due to errors and manipulations done, there is a risk that the auditor will provide an incorrect audit opinion this is known as audit risk. This arises due to the reason that the auditor will not be able to understand the errors and miscalculations and hence produce incorrect opinions.

To choose:Whether the statement is true or false

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The risk that an auditor issues a clean opinion when the financial statements are materially misstated is called O inherent risk. control risk. audit risk. O detection risk.
In a financial statement audit, inherent risk represents a. The risk that misstatements could occur and not be detected by the auditor's procedures. b. The risk that misstatements could occur and not be prevented or detected by the system of internal control. c. The risk that the auditor fails to modify materially misstated financial statements. d. The susceptibility of an account balance to misstatement that could be material.
Detection risk is the risk that a client's system of internal controls will not prevent or detect a material misstatement. O the auditor's procedures will not be effective in detecting a material misstatement. O an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. the financial statements are susceptible to a material misstatement.
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