7 Materiality and Risk - Pearson

Materiality and Risk 7 Two of the fundamental concepts that underlie the logic of the audit process are Materiality and risk. So far, we have discussed planning and the auditors assessment of client business risk, fraud risk, and the risk of material misstatement. This chapter will help you understand the audit risk model and how the risk of mate-rial misstatement is used to determine an acceptable detection risk, which forms the basis of the audit strategy. We will also examine Materiality and consider its role in planning the audit and evaluating the results of tests. LEARNING OBJECTIVES After studying this chapter, you should be able to: 1 Understand and apply the concept of Materiality to the audit. 2 Use professional judgment to determine overall (or planning) and performance Materiality . 3 Apply Materiality to evaluate audit findings.

7 Materiality and Risk T wo of the fundamental concepts that underlie the logic of the audit process are materiality and risk. So far, we have discussed ... In addition to financial statement items, auditors were also concerned about the risk of man-agement override of controls and revenue fraud risk. And what do those key risks mean to the

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