Audit risk involves:
A) only the financial statements.
B) only the ICFR.
C) both the financial statements and ICFR.
D) only cases where fraud exists.

Question

Quizplus · Accepted Answer

Audit risk involves both the financial statements and internal control over financial reporting (ICFR). It is the risk that the auditor may express an inappropriate opinion on the financial statements or ICFR. This risk can arise due to errors or fraud in the financial statements, weaknesses in ICFR, or limitations in the audit process. Therefore, both the financial statements and ICFR are important components of audit risk. Option A and B are incorrect because audit risk involves both financial statements and ICFR, not just one of them. Option D is incorrect because audit risk can arise due to errors or fraud, not just fraud.

Audit Risk Involves