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Inherent and Control Risk Assessment Guide

The document outlines the risk assessment procedure for an auditor. It discusses understanding the inherent risk of the entity due to its nature and controls. It also discusses assessing control risk based on the internal controls and the inherent limitations of those controls. Finally, it addresses how reducing sampling size increases detection risk, while increasing the sample reduces risk.

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58 views1 page

Inherent and Control Risk Assessment Guide

The document outlines the risk assessment procedure for an auditor. It discusses understanding the inherent risk of the entity due to its nature and controls. It also discusses assessing control risk based on the internal controls and the inherent limitations of those controls. Finally, it addresses how reducing sampling size increases detection risk, while increasing the sample reduces risk.

Uploaded by

Far
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

RISK ASSESSMENT PROCEDURE

UNDERSTANDING of the ENTITY to assess INHERENT RISK


due to nature with controls

of the INTERNAL CONTROL to assess CONTROL RISK


because of if internal control fails to
The Job of the AUDITOR is the INHERENT LIMITATIONS: Prevent Detect & Control
checking of DETECTION RISK 1. Human Limitations
2. Collision of Employees
3. Override of Controls

The lesser the sample, the higher the risk of incorrect conclusion
we CAN eliminate sampling risk by auditing the WHOLE population
Reduce by increasing sampling size

TOC CR DR ST MM FS

TOCX CR DR ST MM FS

TOC CR DR ST MM FS

TOCx CR DR ST MM FSx

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