An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing. To examine: Whether the given statement is true or false.

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The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk. b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelated. (AICPA, adapted)

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Chapter 1, Problem 9TFQ

To determine

Introduction:An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To examine: Whether the given statement is true or false.

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The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk. b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelated. (AICPA, adapted)

The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. The susceptibility of an assertion in an account or disclosure to a misstatement before consideration of any related controls Inherent risk The risk that a misstatement that could occur will not be prevented, or detected and corrected, on a timely basis by the entity’s internal control. Control risk The risk that the procedures performed by the auditor will not detect a misstatement that could be material. Detection risk c. Explain how these components are interrelated.

It refers to the risks that a material misstatement will even occur, that it would not be prevented ordetected by client internal controls, and that is not detected by the auditor’s own procedures.a. Inherent riskb. Control riskc. Detection riskd. Audit risk Audit risk and materiality are considered at the level ofa. Overall financial statements.b. Assertions relating to individual account balance, class of transactions, or disclosure.c. Both a and b.d. Neither a nor b.