Question 2 (30 marks)

Part A An auditors concern is to reduce audit risk to an acceptably low level, as it is impossible for him to completely eliminate risk.

a. What is audit risk? Briefly explain the components of audit risk. (6)

b. What is the relationship between audit risk and audit materiality? (2)

Part B

You now understand audit risk from the above question in Part A. As an aspiring auditor, you have been asked to give a brief on fraud and error. Your task is to give a clear distinction between the two (2) terms. You have also been asked to explain a Reportable Irregularity. according to the Auditing and Profession Act. (22)