Question 2

2.1 The risk of the auditor getting it wrong or giving opinions that are not 100% accurate will always be present and this is referred to as audit risk. Audit risk is better understood when the components of the risks are understood. Identify and explain the three components of audit risk.

2.2 The concept of materiality is fundamental when conducting an audit. An auditor makes an opinionated expression on the fair representation of financial statements with regard to all things material. Explain 3 items which best describe the nature of materiality.