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O `hat is Risk
O `hat is Audit
O `hat is Audit Risk
O Audit Risk Model
O Inherent Risk
Components
O Control risk
Components
O Detection risk
Components
O General Questions

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m
 ë An examination and verification

of a company's financial and
accounting records and
supporting documents by a
professional

ë Audit is concerned with the

verification of accounting data,
with determining the accuracy
and reliability accounting
statement and reports.

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Audit risk
O The risk that the
auditor gives an
inappropriate audit
opinion when the
financial report is
materially
misstated

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Õ
    
 
  

ë
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Õ
 
 O The risk of material
misstatements absent any
internal controls or testing
O The first filter of the audit
risk is inherent risk which is
due to the management,
accountant, or due to the
company

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Õ
  
O Gigher in complex transactions

    O Gigher where items are more

naturally prone to fraud
O Based in part on prior
experience
O Industry and management
pressures

ë Inherent risk cannot be

changed by the auditor ² it
just is 10
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ë
  
ë 

 O Depends on the design and
execution of controls
O Audit Risk = risk that internal
controls will FAIL to prevent or
detect misstatement
Gigh CR means high risk
controls will fail
Low CR means low risk controls
will fail
O If CR is high, auditor will not rely
much on controls
O If CR is low, auditor can rely on
ICS and reduce other types of
testing

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 O The risk that audit tests will

 fail to detect material
misstatement
O The probability that an
incorrect audit conclusion will
be drawn from the results of
the examination or that the
audit work will fail to detect
any serious errors.

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ë 

 O A function of the types of
tests the auditor does
O Remember nature, timing, and
extent
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Question # 1:
The probable deviation in expected results is called?

A: Inherent risk

B: Control risk

C: Risk

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Question # 1:
The risk that the auditor gives an inappropriate audit
opinion when the financial report is materially misstated?

A: Audit risk

B: Control risk

C: Risk

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Question # :
Gow many types of risk in audit risk model?

A:  types

B: 3 types

C: ¦ types

1ë
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Question # :
The risk that internal controls will fail to prevent or
detect material misstatement is called?

A: Inherent risk

B: Control risk

C: Detection risk

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Question # 1:
The risk associated with the auditor and on which audit
report depend is called?

A: Inherent risk

B: Control risk

C: Detection risk

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