Question

Auditors performing audit procedures related to accounts, assertions, or disclosures that they normally would not test because they are immaterial or considered low risk is an example of an _______.

1) Audit risk
2) Sampling risk
3) Inherent risk
4) Control risk

Answer 1

Auditors extending their procedures to immaterial or low-risk areas is an example of sampling risk. It is specific to the risks associated with sampling in an audit process and is different from audit risk, inherent risk, and control risk.

Step-by-step explanation:

Auditors performing audit procedures related to accounts, assertions, or disclosures that they normally would not test because they are immaterial or considered low risk is an example of sampling risk.

This refers to the possibility that the auditors' conclusion based on a sample might be different from the conclusion they would reach if they examined every item within an account.

While audit risk includes the overall risk of reaching an incorrect conclusion, sampling risk is specifically associated with the use of sampling in an audit process.

It distinguishes from inherent risk, which refers to the susceptibility of an assertion to a misstatement that could be material, assuming there were no related controls, and from control risk, which is the risk that a misstatement will not be prevented or detected and corrected by the organization's internal controls.