CHAPTER 3 - CHAPTER 3 3-2 Inherent risk and control risk...

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CHAPTER 3 3-2 Inherent risk and control risk differ from detection risk in that inherent risk and control risk exist independently of the audit. The levels of inherent risk and control risk are functions of the client and its environment, and the auditor has little control over these risks. The auditor can control detection risk through the scope (nature, timing, and extent) of the audit procedures performed. Thus, detection risk has an inverse relationship with inherent risk and control risk. 3-23 a. Audit risk is the risk that the auditor may unknowingly fail to appropriately modify the auditor's opinion on financial statements that are materially misstated. Materiality is the magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement. b.
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CHAPTER 3 - CHAPTER 3 3-2 Inherent risk and control risk...

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