The measurement of the auditor's assessment of the likelihood that there are material misstatements due to error or fraud in a segment before considering the effectiveness of internal controls is defined as:
A) Audit risk.
B) Inherent risk.
C) Sampling risk.
D) Detection risk.

Question

Quizplus · Accepted Answer

Inherent risk is the risk that there are material misstatements due to error or fraud in a segment before considering the effectiveness of internal controls. The auditor's assessment of inherent risk helps to determine the nature, timing, and extent of audit procedures. Audit risk is the risk that the auditor expresses an inappropriate audit opinion. Sampling risk is the risk that the conclusions drawn from a sample are not representative of the entire population. Detection risk is the risk that the auditor fails to identify material misstatements in the financial statements.

The Measurement of the Auditor's Assessment of the Likelihood That