audit risk

Audit risk refers to the possibility that an auditor may give an incorrect opinion on a company’s financial statements. It arises from the chance that material misstatements—whether due to error or fraud—may not be detected during the audit process. This risk is influenced by factors such as the complexity of the financial statements, the effectiveness of internal controls, and the auditor's assessment of potential risks. Essentially, audit risk highlights the uncertainties involved in ensuring that a company’s reported financial information is accurate and reliable for stakeholders.