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Unformatted text preview: Assignment 1-6 Audit Risk Assessment Chapter 4: Risk Assessment 4-2. How do inherit risk and control risk differ from detection risk? The risk that the relevant assertions are misstated consist of two components: Inherit risk (IR) is the susceptibility of an assertion about a class of transactions, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls. Control risk (CR) is the risk that a misstatement that could occur in an assertion about a class of transaction, account balance, or disclosure and that could be material, either individually or when aggregated with other misstatements will not be prevented, or detected and corrected, on a timely basis by the entity’s internal control. The levels of IR and CR are functions of the entity and its environment. The auditor has little or no control over these risks. Whereas detection risk (DR) is the risk that the procedures performed no control over these risks....
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This note was uploaded on 02/29/2012 for the course ACCOUNTING 470 taught by Professor Kwong during the Spring '11 term at Franklin.
- Spring '11