The inappropriate opinion of auditor on the financial statements leads to audit risk. It occurs in the following circumstances. When an auditor issues an unqualified report when a qualification is rationally justified, or a qualified audit report is issued when there is no need for such qualification, or if the auditor fails to highlight a substantial matter in his/her audit report, or when an auditor provides an opinion which may not be reasonable due to the limitations on the scope of performance of audit. There are three elements in audit risk. They are: inherent risk, control risk and detection risk. The dissertation focuses on each element of audit risk and its relationship with audit fees.
The main significance of this research is it mainly focuses on the empirical study and its results unlike surveys that were mainly used by many prior researches. In this context, certain assumptions are made to estimate audit risk and its components. The assumptions are described in detail in methodology section. Based on these assumptions, the relationship of audit risk with audit price is studied and analyzed. The relationship of audit price with the components of audit risk is also estimated. And the relationship of audit price with inherent risk, one of the main components of audit risk is also evaluated in this study. In this way, the study tries to focus on filling the gaps in the prior researches.
Chapter 1 consists of introduction, research background, research objectives and question, and the implications of the study. Chapter 2 focuses on the review of associated literature and how it is related to the objective of research. Chapter 3 explains the methodology and processes used to obtain data for the dissertation. Chapter 4 has results and analyses. Summary of results and findings, limitations of the study, conclusions drawn from the findings, and discussion and suggestions for further research are presented chapter 5.