- *risk of giving an inappropriate *audit opinion on the *fair presentation of an organization’s *financial statements. The *sampling of transactions and the *compliance testing of controls cannot offer cast-iron guarantees that all irregularities have been identified, though external audit risk can be mitigated by (i) careful *audit planning, (ii) *representation letters from management, and (iii) adequate *malpractice insurance. External audit risk is sometimes analyzed into three components - *inherent risk, *control risk, and *detection risk - that can be quantified and multiplied together. Audit risk is assessed in order to direct *audit tests at the areas of highest risk: "Generally, the higher the assumed risk, the more stringent the audit action" (Lee, 1993, 177). 2. In internal auditing, the *risk of overlooking or misinterpreting *material matters of concern. The matters under consideration may be quantitative or qualitative.
Auditor's dictionary. 2014.
Look at other dictionaries:
Audit risk — (also referred to as residual risk) refers to acceptable audit risk, i.e. it indicates the auditor s willingness to accept that the financial statements may be materially misstated after the audit is completed and an unqualified (clean) opinion… … Wikipedia
audit risk — The risk that an auditor fails to qualify the audit report when the financial statements are materially misleading, i.e. do not give a true and fair view. The audit risk consists of three components: • the inherent risk, i.e. the likelihood of… … Accounting dictionary
Audit Risk — The risk that an auditor will not discover errors or intentional miscalculations (i.e. fraud) while reviewing a company s or individual’s financial statements. There are two general categories of audit risk – risk regarding assessment … Investment dictionary
external audit risk — See *audit risk (definition 1) … Auditor's dictionary
Risk assessment — is a common first step in a risk management process. Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat. Quantitative risk assessment requires calculations of… … Wikipedia
Risk — takers redirects here. For the Canadian television program, see Risk Takers. For other uses, see Risk (disambiguation). Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable… … Wikipedia
Audit — For other uses, see Audit (disambiguation). Accountancy Key concepts Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow management … Wikipedia
risk-based audit — An auditing technique that responds to the risk factors in an audit by assessing the levels of risk attached to different areas of an organization s system and using the results to devise audit tests. The purpose is to focus the audit on the… … Accounting dictionary
risk — The *probability of the occurrence of an event with negative consequences. The IIA defines risk as the probability that an event or action, or inaction, may adversely affect the organization or activity under review (quoted in Hermanson and… … Auditor's dictionary
audit plan — audit planning memorandum; = audit strategy A document outlining the strategy to be applied to each manageable area of the accounting system and financial statements of an audit client. The plan would take into account the assessed levels of… … Accounting dictionary