Acceptable audit risk and the amount of substantive evidence required are inversely related.

Question

Quizplus · Accepted Answer

Acceptable audit risk is the level of risk that the auditor is willing to accept that the financial statements may contain a material misstatement. When acceptable audit risk is lower, it means that the auditor is less willing to accept the risk, and therefore, requires more substantive evidence to reduce the risk of material misstatement. Conversely, when acceptable audit risk is higher, the auditor is willing to accept a higher level of risk, and therefore, may require less substantive evidence.

Acceptable Audit Risk and the Amount of Substantive Evidence Required