Risk Considerations in Obtaining Audit ERisk Considerations in Obtaining Audit Evidence

Risk Considerations in Obtaining Audit Evidence

22 In obtaining audit evidence, the auditor shall use professional judgement to assess the risk of material misstatement and design further audit procedures to ensure this risk is reduced to an acceptably low level.

23 Sampling risk and non-sampling risk can affect the components of the risk of material misstatement. For example, when performing tests of controls, the auditor may find no errors in a sample and conclude that controls are operating effectively, when the rate of error in the population is, in fact, unacceptably high (sampling risk). Or there may be errors in the sample which the auditor fails to recognise (non-sampling risk). With respect to substantive procedures, the auditor may use a variety of methods to reduce detection risk to an acceptable level. Depending on their nature, these methods will be subject to sampling and/or non-sampling risks. For example, the auditor may choose an inappropriate substantive analytical procedure (non-sampling risk) or may find only minor misstatements in a test of details when, in fact, the population misstatement is greater than the tolerable amount (sampling risk). For both tests of controls and substantive tests of details, sampling risk can be reduced by increasing sample size, while non-sampling risk can be reduced by proper engagement planning supervision and review.