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Explain how internal control work done by auditors impacts the audit risk equation. Does control risk...

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Accounting

Explain how internal control work done by auditors impacts theaudit risk equation. Does control risk change if the auditors areproviding an opinion over internal controls? How is detection riskimpacted?

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Definition Audit Risk is the risk that an auditor expresses an inappropriate opinion on the financial statements Explanation Audit risk is the risk that an auditor issues an incorrect opinion on the financial statements Examples of inappropriate audit opinions include the following Issuing an unqualified audit report where a qualification is reasonably justified Issuing a qualified audit opinion where no qualification is necessary Failing to emphasize a significant matter in the audit report Providing an opinion on financial statements where no such opinion may be reasonably given due to a significant limitation of scope in the performance of the audit Model Audit Risk Inherent Risk x Control Risk x Detection Risk Audit risk may be considered as the product of the various risks which may be encountered in the performance of the audit In order to keep the overall audit risk of engagements below acceptable limit the auditor must assess the level of risk pertaining to each component of audit risk Components Explanation of the 3 elements of audit risk is as follows Inherent Risk Inherent Risk is the risk of a material misstatement in the financial statements arising due to error    See Answer
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