BMC Associates says Replied on 11th July,2026 04:27 AM

There is an inverse relationship between materiality and audit risk because when the auditor sets a lower materiality level, even small misstatements become significant. As a result, the auditor must perform more extensive audit procedures to reduce the risk of issuing an inappropriate audit opinion. Therefore, lower materiality means lower acceptable audit risk and more audit evidence is required. Conversely, if the auditor sets a higher materiality level, only larger misstatements are considered significant. In this case, the acceptable audit risk is relatively higher, and the extent of audit testing may be reduced. For example, if materiality is fixed at ₹1 lakh instead of ₹10 lakh, the auditor must detect even small errors, increasing the amount of audit work required. Thus, as materiality decreases, audit risk also decreases, and vice versa. For expert guidance on auditing standards, risk assessment, and financial reporting, businesses often rely on experienced chartered accountant firms in gurgaon. A qualified chartered accountant gurgaon, trusted ca firm in gurgaon, or professional ca in gurgaon can help ensure compliance with auditing standards and effective audit planning.