CA Inter P5 · Chapter 3 · Question 1 of 13
Audit risk is a function of:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The risks of material misstatement and detection risk
Explanation
Audit risk is the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated. It is a function of the risks of material misstatement (made up of inherent risk and control risk) and detection risk. Business risk is broader and only some of it gives rise to risks of material misstatement.
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