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Internal Audit 749 views 1 replies

Please give EXAMPLES of inherent risk, control risk and detection risk.

Thank you everyone whosoever replies me,,..,,

Replies (1)

INHERENT RISK- this is the risk of material misstatment coming into existence due to internal and external factors relating to client. e.g, inefficient employees complicated accounting policy etc which led to errors in FS

 

CONTROL RISK- this is the risk of that material misstatement which are being unprevented by internal control of the company. e.g. lack of internal audit, no proper authorisation of expenses, weaker recruitment process which result in inefficient staff.

 

Detection Risk-this is the same material misstatement which are not detected by internal control remain undetected even by auditor.  e.g. in sample selection there may be some transactions which are not selected escape from the audit even they are not detected by internal audit staff


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