## Audit Risk
### What Audit Risk Means
Audit risk is a technical term related to the process of auditing — the risk that the auditor expresses an inappropriate audit opinion when financial statements are materially misstated.
### What Audit Risk Does NOT Include
Audit risk does not refer to the auditor's business risks such as:
- Loss from litigation
- Adverse publicity
- Other events arising in connection with the audit
Audit risk also does not include the risk that the auditor might express an opinion that financial statements are materially misstated when they are not — this risk is ordinarily insignificant.
### How Risk Is Assessed
- Assessment of risks is based on audit procedures to obtain necessary information, plus evidence gathered throughout the audit
- It is a matter of professional judgment, not precise measurement
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### Materiality and Audit Risk: Not Just Planning Stage Concepts
A common misconception: "Materiality and audit risk are only considered at the planning stage."
Correct position: The concept of materiality is applied by the auditor:
1. In planning and performing the audit
2. In evaluating the effect of identified misstatements
3. In evaluating uncorrected misstatements on financial statements
4. In forming the opinion in the auditor's report
> Materiality and audit risk are considered at all stages of the audit, not just planning.