Audit Risk Model - Because this is a difficult concept, I summarized it one more time for you. I hope it helps. The audit risk model states that audit risk is directly proportional to inherent risk, control risk, and detection risk. Inherent risk and control risk are risks associated with the auditee, detection risk is associated with the auditor. In assessing inherent and control risks, the entity's business risks and the risk of material misstatement due to error or fraud must be considered. The auditor uses this risk assessment model to design audit procedures for the audit. When I was studying for the CPA exam I used the following chart to help me remember the key points.
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