Audit risk is
A)the risk that material misstatements occur in the financial statements
B)the risk that material misstatements occur in the financial statements and are not detected by the auditor
C)the risk that material misstatements occur and are not detected by the auditor
D)the risk that misstatements occur in the financial statements and are not detected by the auditor

Question

Quizplus · Accepted Answer

Audit risk is the risk that the auditor expresses an inappropriate opinion on the financial statements that are materially misstated. It comprises two components - i) the risk of material misstatements occurring in the financial statements, and ii) the risk that the auditor fails to detect such misstatements. Therefore, option B is the best choice as it correctly includes both components of audit risk.

Audit Risk Is