Question

Audit risk is typically considered and assessed:

a) Before risk assessment
b) Concurrently with risk assessment
c) After risk assessment
d) Irrespective of risk assessment

Answer 1

Audit risk is assessed concurrently with risk assessment during the planning and execution of an audit to evaluate the risk of material misstatement and integrate it into the overall risk management strategy.

The correct option is b. Concurrently with risk assessment

Step-by-step explanation:

The question pertaining to audit risk is related to the processes that auditors undertake when planning and conducting an audit. Audit risk is assessed concurrently with risk assessment. This is because understanding the risks associated with a particular audit is crucial for determining the nature, timing, and extent of audit procedures. Auditors need to assess the risk of material misstatement in a company's financial reports, which involves both the risk that the financial statements contain material misstatements due to error or fraud (inherent and fraud risks) and the risk that the auditor will not detect such misstatements (detection risk).

To effectively manage and mitigate audit risk, it should be integrated into the overall risk assessment. Therefore, option b) Concurrently with risk assessment is the correct option as it reflects the inherent process of audit planning and execution.

Answer 2

Audit risk is assessed concurrently with risk assessment during the planning and execution of an audit to evaluate the risk of material misstatement and integrate it into the overall risk management strategy.

The correct option is b. Concurrently with risk assessment

Step-by-step explanation:

The question pertaining to audit risk is related to the processes that auditors undertake when planning and conducting an audit. Audit risk is assessed concurrently with risk assessment. This is because understanding the risks associated with a particular audit is crucial for determining the nature, timing, and extent of audit procedures. Auditors need to assess the risk of material misstatement in a company's financial reports, which involves both the risk that the financial statements contain material misstatements due to error or fraud (inherent and fraud risks) and the risk that the auditor will not detect such misstatements (detection risk).

To effectively manage and mitigate audit risk, it should be integrated into the overall risk assessment. Therefore, option b) Concurrently with risk assessment is the correct option as it reflects the inherent process of audit planning and execution.