Your Ask Joey ™ Answer

What is audit risk?

Audit risk is the risk that the auditor will fail to modify an opinion on the financial statements when they are in fact materially misstated. This will typically arise because an auditor will never be able to obtain absolute assurance by conducting audit procedures.

Audit risk will only be able to be reduced to an adequately low level before issuing an opinion on the financial statements. The seesaw below shows how risk of material misstatement is inversely related to detection risk.


Back To All Questions

You might also be interested in...

  • Discontinued Operations on the FAR CPA Exam

    Overview of Discontinued Operations In financial reporting, discontinued operations refer to a component of a company’s core business or product line that have been divested or shut down. Discontinued operations will be reported (net of tax) separately from continuing operations on the income statement. The reason that discontinued operations are reported separately is so that...

  • Equity Method Excel Workbook

    If you would like to use the Excel workbook that was used to create the Universal CPA lecture on the equity method, please click the link below to download the Excel workbook: Equity Method Lecture Example https://youtu.be/QE4flnmuSkw

  • How Hard is the CPA Exam?

    So you’re thinking about taking the CPA exam? Whether you have a dream of becoming a tax advisor, feel as though you need public accounting experience, or just want to solidify your business acumen, the CPA license is one of the most prestigious and well respected licenses in the business world. The exam itself is...