The auditor controls the level of audit risk by the

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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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