Engagement risk is
A) The risk of issuing an incorrect audit opinion.
B) The auditor's risk of loss from events arising in connection with financial statements audited and reported upon.
C) The overall risk of material misstatement.
D) The risk of the client's financial failure.

Question

Quizplus · Accepted Answer

Engagement risk refers to the risk of loss to the auditor arising from events that are related to the financial statements audited and reported upon. This includes events such as lawsuits, reputational harm, and financial loss that could arise from the audit engagement. It is different from inherent risk or control risk which relate to the risk of material misstatements in the financial statements. The risk of issuing an incorrect audit opinion and the risk of the client's financial failure are also not considered engagement risk.

Engagement Risk Is