[Anonymous]

How do you determine if IR, CR and DR are (high, medium or low?) I know IR and CR are inversely related to DR but am unsure how to know what level to make each.

[Anonymous]

Inherent Risk-has to do with the type of account (e.g. cash has a higher level of inherent risk because it is more susceptible to being stolen and misstated on the FS)given there were no I/C.

Control Risk-has to do with I/C. If the company has weak I/C, control risk is high because there is a higher risk that the I/C will not catch a material misstatement.

Detection Risk has to do with the auditor's substantive testing. If the auditor does a lot of substantive procedures, then detection risk is low because the auditor is more likely to catch any MATERIAL misstatements and vice versa.

Hope it helps. Make sure you do all this because they test this stuff a lot. I'm pretty sure I got at least 8 questions on audit risk

[Anonymous]

BTW CPAreviewforfree has some sick simulations that help a lot on everything for AUD. Only $10… 🙂

[Author]

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