The probability that either an error or fraud will result in a material misstatement is risk of material misstatement and inherent risk
<h3>What is material misstatement?</h3>
A major misrepresentation is information in the financial statements that is sufficiently false to have an effect on the financial choices of those who rely on it.
Some errors are material despite not being noteworthy in terms of magnitude. A loan made to a director of a corporation, for instance, is material because those who use financial statements will value the information for making decisions. Both fraud and error are the causes of misstatements.
A misrepresentation happens when anything in the financial accounts is not handled correctly, which means that the relevant financial reporting system, notably IFRS, has not been properly implemented.
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