06-06-2005, 03:07 AM
I will try not to reproduce the standard ,...let see,..
as you know AR = IR*CR*DR
Inherent risk is the suseptability of the account balance to mistatement in the absence of any control environment. Forexample cash and inventory balances are more prone to misstatement when compared to balances like debtors and creditors bcs the risk of theft and loss due to misappropriation is more in cash / inventory compared to debtors and creditors,...
Control risk is the risk of misstatement which could occure due to failure of internal control. forexample since the finance manager was on leaves no one approved the bank reconcilaition and thus the control was never performed resulting in an error in bank reconciliation which went undetected.
hope the concept is okay now
as you know AR = IR*CR*DR
Inherent risk is the suseptability of the account balance to mistatement in the absence of any control environment. Forexample cash and inventory balances are more prone to misstatement when compared to balances like debtors and creditors bcs the risk of theft and loss due to misappropriation is more in cash / inventory compared to debtors and creditors,...
Control risk is the risk of misstatement which could occure due to failure of internal control. forexample since the finance manager was on leaves no one approved the bank reconcilaition and thus the control was never performed resulting in an error in bank reconciliation which went undetected.
hope the concept is okay now
