Lesson 3

Lesson 3 - Name Jay Patadia Enrollment Number 688430 Course...

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Name: Jay Patadia Enrollment Number: 688430 Course Number: ACCT 3222Z Lesson 3 3-2 How do inherent risk and control risk differ from detection risk? 1. Inherent risk(IR) can be defined as risk of material misstatement arise in absence of internal control while control risk (CR) can be described as internal control will fail to detect the material misstatement in the relevant assertion on timely basis. 2. Detection risk (DR) referred as a risk that auditor cannot detect the misstatement in the relevant assertion. 3. Combination of IR and CR is referred as client’s risk as it stems from decision made by client. 4. DR referred is auditor’s risk as it’s depends on auditor approach to the audit. Though DR cannot be reduce to zero as auditor seldom examines the 100 percent of the records. 5. DR can be controlled by the auditor while CR and IR exist independently of the audit. 6. DR has inverse relationship to IR and CR. 3.9
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Lesson 3 - Name Jay Patadia Enrollment Number 688430 Course...

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