What is risk of material misstatement?

Why do auditors concentrate their efforts on material items in the accounts?

Auditors perform audits so as to give reasonable assurance that the financial statements of the entity show a true and fair view. Financial statements of the entity are said to show a true and fair view if, after collecting sufficient and appropriate audit evidence, the auditor concludes that financial statements do not contain material misstatement.

Therefore auditors concentrate their effort on material items on in the accounts so that they can reduce the risk of issuing wrong opinion (audit risk) and also due to the fact that material items in the accounts are the one that affects the decision of the user of financial statements.

Leave a Comment

Your email address will not be published. Required fields are marked *

%d bloggers like this: