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Unformatted text preview: tor will uncover all material misstatements. The auditor provides no assurance that immaterial misstatements will be detected. Audit Risk
The second major concept involved in auditing is audit risk, which is the risk that
the auditor may unknowingly give a “clean” opinion on ﬁnancial statements that
are materially misstated.
Audit risk is the risk that the auditor expresses an inappropriate audit opinion when
the ﬁnancial statements are materially misstated.8 The auditor’s standard report states that the audit provides only reasonable assurance that the ﬁnancial statements do not contain material misstatements. The
term reasonable assurance implies some risk that a material misstatement could
be present in the ﬁnancial statements and the auditor will fail to detect it. The
auditor plans and conducts the audit to achieve an acceptably low level of audit
risk. The auditor controls the level of audit risk by the effectiveness and extent
of the audit work conducted. The more effective and extensive the audit work,...
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This note was uploaded on 12/08/2012 for the course ACCT 564 at Washington University in St. Louis.