The Concept of Audit Risk

Abstract There is a link between the concept of materiality of auditing and the concept of audit risk. Auditors aim is to concentrate on those areas where there is a high probability of failure or error. The risk of audit is that the auditor may present an opinion that the financial statements are not presented fairly and impartially when they actually are. The risk of audit refers to the information that the financial statements taken as a whole are fairly represented when they are not. Audit risk is the risk faced by auditors that they will fail to disclose material errors in the financial statements. It is expected from them to give reasonable assurance that there are no such errors. In simplest terms, the audit risk is risk connected to the financial statements; it is about that they are not realistic and objective, and that the auditor is unable to detect that. The risk of revision has the following two components: 1) risk that the financial statements contain false allegations; and 2) risk that the auditor will not disclose them. The auditor changes the nature, timing and extent of the audit actions in accordance to its own assessment of the risk. If it is evaluated that the risk will be high, then reliable evidence should be collected. The primary goal is to minimize the overall risk to an enough low level, and to achieve more effectively the desired confidence. The general audit risk is a combination of different risks of the audit. Therefore, the audit risk of the financial statements cannot be considered as a whole. Keywords: audit; risk; financial statements; concept.