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 auditor assesses the risk of material misstatement because it affects the level of detection risk that the auditor may accept. Detection risk is the risk that the auditor's procedures will not detect a material misstatement that exists, and it is the only component of audit risk that the auditor can directly control. As such, the auditor must assess the risk of material misstatement in order to determine how much detection risk can be accepted.

An Auditor Assesses the Risk of Material Misstatement Because It