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9 (2) - Jia Wang CH 9 Due 9-2 Because if financial...

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Jia Wang CH 9 Due 2011/2/24 9-2 Because if financial statements are materially misstated, users' decisions may be affected, then cause financial loss to them. There are a lot of different kinds people to use the financial statement. The auditor must do the professional judgment when they apply the materiality and it must based on the professional auditing standards 9-11 PDR = AAR IR x CR Planned detection risk: A measure of the risk that audit evidence for a segment will fail to detect misstatements exceeding a tolerable amount, should such misstatements exist. Acceptable audit risk: A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued. Inherent risk: A measure of the auditor's assessment of the likelihood that there are material misstatements in a segment before considering the effectiveness of internal control.
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