Risk and materiality are related; risk is a measure of uncertainty where materiality measures magnitude.

Question

Quizplus · Accepted Answer

Risk and materiality are related because they both focus on factors that may impact the accuracy and reliability of financial statements. Risk refers to the level of uncertainty or potential for loss associated with a particular event or circumstance, while materiality measures the magnitude or significance of an item or transaction in relation to the financial statements as a whole. Together, these concepts help auditors assess the overall level of risk and determine whether any potential misstatements or errors are significant enough to warrant further investigation or disclosure in the financial statements.

Risk and Materiality Are Related; Risk Is a Measure of Uncertainty