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.
Audit risk is generally referred as the risk, which is found out by an auditor in an incompetent report due to the failure of auditors for observing the misstatement of materials either by the mistakes or scam. According to the auditing standers (SAS), the audit risk depends on the inherent risk (IR), control risk (CR), detection risk (DR) therefore; audit risk could be affected by the complications of these risks (Gray & Manson, 2007).
Impact of inherent risk on audit risk: Inherent risk is the weaknesses of an account balance. Inherent risk is probably changed by the change in the nature and characteristics of business for accounts as like inventory, bills and receivable loans, equipment, plant, and property (Allegrini & D'Onza, 2003). On the other hand, the nature of the business could make a little effect on cash, payable notes, and payable mortgages.
Therefore, it could be able to help for making misstatement that would also ...
The factors which affect audit risks are determined. The statements on auditing standards are reviewed.