1. Which of the following best describes the concept of audit risk? A. The risk that an auditor will not detect a material misstatement in the financial statements B. The risk that an auditor will lose their license due to negligence C. The risk that an auditor will not be able to complete the audit on time D. The risk that an auditor will not be adequately compensated for their work Answer: A. The risk that an auditor will not detect a material misstatement in the financial statements Rationale: Audit risk refers to the risk that the auditor may issue an incorrect audit opinion due to failing to detect material misstatements in the financial statements. 2. Which of the following is NOT a component of audit risk? A. Detection risk B. Control risk C. Inherent risk D. Sampling risk Answer: D. Sampling risk Rationale: Sampling risk is a component of detection risk, not audit risk. The components of audit risk are inherent risk, control risk, and detection risk. 3. Which of the following best describes the concept of inherent risk? A. The risk that there are material misstatements in the financial statements due to errors or fraud B. The risk that the client's internal controls will not prevent or detect material misstatements C. The risk that the auditor will not detect a material misstatement in the financial statements D. The risk that the auditor will not be able to complete the audit on time Answer: A. The risk that there are material misstatements in the financial statements due to errors or fraud Rationale: Inherent risk refers to the risk that there are material