What Is the Relationship Between Materiality and Audit Risk

question 30

Essay

What is the relationship between materiality and audit risk?

---

Definitions:

Gross Margin

A financial metric indicating the difference between revenue and the cost of goods sold, divided by revenue, often expressed as a percentage.

Inventory Account

An account in the financial statements that reflects the value of a company's goods that are available for sale or in the process of being produced for sale.

Consolidated Statement

A financial statement that includes all assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries.

Cost Of Goods Sold

Direct costs attributable to the production of goods sold by a company, including material and labor.