Question

1. What is audit risk?

2. What is audit risk model?

3. What are the components of audit risk and how do these relate to each other?

4. How does materiality and audit approach interact with the audit risk mode?

Answer 1

Answer 1. Audit Risk ! 1 It is the risk which arises when an auditor it will not detect eretions or freand while examining financial statements of an entity for this ? The auditor imay issue unqualified reported There are 3 types of andit risks which can be presented diagramatically as follows', - Audit Risk Detection Risk Inherent Risk Control Risk) (4) Inherent risult This risks arise when a client's financial statements are susceptible to material mis statements. ®) Control Risk It arises when material mis statemal would not be prevented or detected by client's internal control system. C) Detection RISA- It anises when audit procedures used are not able to detect material misstatement. Therefore, Andit Risks cana represented as ! Andit Picker Inherent risk X Control Risk X Detention So, Andet Risk z IR x CRXDR. RICK