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December 1983
AICPA American Institute of
Certified Public Accountants
Audit Risk and Materiality in
Conducting an Audit
1. This Statement provides guidance on the auditor's consideration
of audit risk and materiality when planning and performing an examination
of financial statements in accordance with generally accepted
auditing standards. Audit risk and materiality affect the application of
generally accepted auditing standards, especially the standards of field
work and reporting, and are implicit in the auditor's standard report.
Audit risk and materiality, among other matters, need to be considered
together in determining the nature, timing, and extent of auditing procedures
and in evaluating the results of those procedures.
2. The existence of audit risk is implicit in the phrase " in our opinion."
Audit risk1 is the risk that the auditor may unknowingly fail to
appropriately modify his opinion on financial statements that are materially
misstated. 2
1In addition to audit risk, the auditor is also exposed to loss or injury to his professional
practice from litigation, adverse publicity, or other events arising in connection with
financial statements that he has examined and reported on. This exposure is present
even though the auditor has performed his examination in accordance with generally
accepted auditing standards and has reported appropriately on those financial statements.
Even if an auditor assesses this exposure as low, he should not perform less
extensive procedures than would otherwise be appropriate under generally accepted
auditing standards.
2This definition of audit risk does not include the risk that the auditor might erroneously
conclude that the financial statements are materially misstated. In such a situation,
he would ordinarily reconsider or extend his auditing procedures and request
that the client perform specific tasks to reevaluate the appropriateness of the financial
Copyright © 1983 by the
American Institute of Certified Public Accountants, Inc.
1211 Avenue of the Americas, New York, N. Y. 10036- 8775
1234567890 AudS 89876543
Statement on
Auditing Standards
Issued by the Auditing Standards Board 47
