Audit Risk Models

In this lecture you will learn about what determines the extent of audit work performed. You will learn about how audits are tailored for different circumstances. The lecture deals with audit risk. The audit risk is the risk that the auditor gets it wrong. First, we need to recognize that an audit provides reasonable assurance, not absolute assurance or a guarantee. Secondly, the opinion states that the financial statements are free of material misstatements, not all statements but material ones. With this understanding in mind, it is entirely possible that the auditor gets their opinion wrong when there are intact one or more material misstatements contained within the financial statements that were not detected during the course of the audit.

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