@sbarker
Quoting from Wiley:
Inherent risk refers to the likelihood of material misstatement of an assertion, assuming there is not related internal control.
The risk differs by account and assertion. For example, cash is more susceptible to theft than an inventory of coal. The risk is assessed using various analytical techniques, avail. information on the company and its industry, as well as by using overall auditing knowledge.
Quoted from memory:
Control risk is the risk that internal control is not operating effectively leading to material misstatement of the Financial Statements. For example, if the auditors tests internal controls and finds them to be effective, he would set control risk at a low level. A “low” control risk means that internal controls can be reliably relied upon. Conversely, if the internal controls are deemed not effective, internal control should not be relied upon and control risk would be set at “high” or “maximum.”
Hope this helps. Let me know if you need further explanation or how control risk affects detection risk.
Question:
For people using Becker, how are you guys dealing with the terminology in the A4 transactions cycle section?
It seems like I understand the segregation of duties but get tripped up by terms I've never heard of.
BEC - 84
AUD - 83
FAR - 82
REG - 81
I'm DONE! CERTIFIED PARTY ANIMAL!
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