ABSTRACT
Introduction Auditors can never examine every risk, event, or transaction that may a ect the nancial statements of a company, nor can they use substantive tests to verify every entry to every account in the nancial statements. For companies such as Wal-Mart or Tesco, which experience millions of sales transactions, auditors may examine only a small portion of the actual recorded transactions. Auditors need to prioritize their audit e orts and focus their attention on areas where risks are most signi cant to the company and the risk of material misstatements is highest. The phrase “nature, extent, and timing of audit evidence” implicitly recognizes that the auditor must make tradeo s in the type and volume of evidence obtained during the audit.
