The entity, risk assessment and materiality (Vocabulary)

Definition of words

Planned detection risk

a measure of the risk that audit evidence for a segment will fail to detect misstatements exceeding the performance materiality amount, should such misstatements exist

Control risk

a measure of the auditor's assessment of the likelihood that misstatements exceeding a performance materiality in a segment will not be prevented or detected by the client's internal controls

Acceptable audit risk

a measure of how much risk the auditor is willing to take that the financial statements may be materially misstated after the audit is completed and an unqualified audit opinion has been issued

Performance materiality level

the materiality allocated to any given account balance

Preliminary judgment about materiality

the maximum amount by which the auditor believes that the statements could be misstated and still not affect the decisions of reasonable users

Audit assurance

This term is synonymous with acceptable audit risk

Materiality

the magnitude of an omission or misstatement of accounting information that makes it probable that the judgment of a reasonable person would have been changed

Inherent risk

a measure of the auditor's assessment of the likelihood that there are material misstatements before considering the effectiveness of internal control

an increase in acceptable audit risk

decrease evidence

an increase in inherent risk

decrease evidence

a decrease in control risk

decrease evidence

an increase in planned detection risk

increase evidence

an increase in performance materiality

decrease evidence