Risk is:
A) measured by tolerable error.
B) to be avoided in the audit.
C) a measure of uncertainty.
D) all of the above

Question

Quizplus · Accepted Answer

Risk is defined as the potential for loss or uncertainty. It is a measure of the uncertainty or variability of outcomes. Risk cannot be completely eliminated, and auditors must manage it appropriately to ensure that audited financial statements are reliable. Therefore, choice A is incorrect; tolerable error is not a measure of risk but rather a measure of the level of error that is acceptable in financial statements. Similarly, choice B is incorrect; auditors cannot avoid risk but rather they must identify, assess, and manage it appropriately during their audit. Therefore, the best answer is C, which accurately reflects the nature of risk as a measure of uncertainty.

Risk Is