The risk of material misstatement refers to which of the following?
A)Inherent risk.
B)Control risk and acceptable audit risk.
C)The combination of inherent risk and control risk.
D)Inherent risk and audit risk.

Question

Quizplus · Accepted Answer

The risk of material misstatement is the combination of inherent risk and control risk. It refers to the risk that the financial statements are materially misstated, whether due to error or fraud. Inherent risk is the risk that exists in the absence of controls, while control risk is the risk that a material misstatement will not be prevented or detected on a timely basis by the entity's internal controls. Acceptable audit risk is the risk that the auditor is willing to accept that the financial statements may be materially misstated even after an audit has been conducted.

The Risk of Material Misstatement Refers to Which of the Following