The auditor should consider audit risk and materiality when planning and performing an audit of financial statements in accordance with approved auditing standards. Materiality and audit risk should be considered together in determining the nature, timing and extent of auditing procedures and in evaluating the results of those procedures.

Required:

Part 1

a.Define audit risk

b.Describe its components and how these are related.

Part 2

a.Define materiality and factors affecting it.

b.Describe the relationship between materiality for planning purposes and materiality for evaluation purposes