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The Nature of Risks: Inherent and Control Risks

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Based on the information presented in the application form linked below, determine whether the factors are likely to increase, decrease, or have no effect on the risk of material misstatement. Do these factors indicate inherent risk or control risk? In the provided fields in the application form, mark your answers as Yes (Y) or No (N).

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Solution Summary

The author determines if certain facts increase or decrease risk for an apple orchard company and if the nature of the risk is either an inherent or a control risk. He also explains the rationale for all answers.

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Factors Affecting Audit Risk

In planning and performing an audit, auditors assess the risks associated with an audit using various analytical techniques, experience, and knowledge of the company and industry. How is audit risk affected by inherent risk, control risk, and detection risk?

Be sure to substantiate your findings by reviewing Statements on Auditing Standards (SAS) on the American Institute of CPAs (AICPA) website.

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