Which of the following statements best describes the role of audit risk in a financial statement audit?

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Which of the following statements best describes the role of audit risk in a financial statement audit?

A. Audit risk indicates that the auditor has tested all transactions.
B. The client company takes on audit risk, because an independent third party is performing the audit.
C. Audit risk indicates that the auditor has not tested everything, so there is still risk that a misstatement is present upon the completion of the audit.
D. Audit risk is the risk that a misstatement would likely change the judgment of a reasonable financial statement user.

Answer: C

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