Dear ma'am,
the definition of audit risk is: "Audit risk is the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated."
So, does this mean that when an auditor gives a modified opinion for FSs which are free from material misstatements, that is not audit risk?
thank you so much!
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Audit risk
5y ago#1In the main, audit risk is saying the financial statements "present fairly/show a T&F view" - when they don't. I.e. expressing an unmodified opinion when it should have been modified.
In theory it also includes expressing a modified opinion when it should be unmodified. This really doesn't happen in practice! If the auditor says to management "we are going to modify the opinion because [this material is not recoverable and you haven't made an allowance for it - so trade receivables are overstated" - if management believes that there is no misstatement because the debt is recoverable, it is for management to provide additional evidence to the auditor to show that is the case.
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