The risk of material misstatement refers to
A) control risk and acceptable audit risk.
B) inherent 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 encompasses both inherent risk and control risk. Inherent risk is the risk of a misstatement occurring in the absence of any internal controls, while control risk refers to the risk that the internal controls in place are not effective in preventing or detecting a misstatement. Therefore, the risk of material misstatement is the combination of these two risks. Acceptable audit risk, while important, is not directly related to the risk of material misstatement.

The Risk of Material Misstatement Refers to