Acta Universitatis Danubius. Œconomica, Vol 11, No 3 (2015)

Abstract

Recent European reforms on audit regulations have been motivated by efforts to increase audit quality, functioning and performance. All legal measures should have a clear and unequivocal benefit to audit quality, provide for a robust framework for auditor independence and strengthen corporate governance. We believe the adoption of Directive 2014/56 and Regulation 537/2014 expanded auditor reporting requirements and strengthened the role of independent audit and risk committees, which will positively contribute towards audit quality. This paper aims to critically assess the status quo of audit risk assessment in current European standards and regulations, by conducting a theoretical analysis of different aspects of audit risk. Our main objective is to stress the importance of detecting inherent and control risk, which lead to material misstatement at the assertion level. They need to be assessed so as to determine the nature, timing and extent of further audit procedures necessary to obtain sufficient appropriate audit evidence. These pieces of evidence enable the auditor to express an opinion on the financial statements at an acceptably low level of audit risk. Therefore, we point to the fact that researchers as well as practitioners and policymakers have to be careful when using audit tools and assessing risk levels, as their conclusions continuously shape the regulations.