An auditor assesses the risk of material misstatement because it
A) Is relevant to the auditor's understanding of the control environment.
B) Provides assurance that the auditor's overall materiality levels are appropriate.
C) Indicates to the auditor where inherent risk may be the greatest.
D) Affects the level of detection risk that the auditor may accept.

Question

Quizplus · Accepted Answer

The risk of material misstatement affects the level of detection risk that the auditor may accept. The higher the risk of material misstatement, the lower the level of detection risk that the auditor can accept, and vice versa. A, B, and C may be relevant to the auditor's risk assessment, but they do not directly relate to why the auditor assesses the risk of material misstatement.

An Auditor Assesses the Risk of Material Misstatement Because It