Audit Risk/Inherent/Control

[maani]

AOA Seniors,

I want to understand the proper concept of Inherent Risk and Control Risk.Audit Risk is the term that means, there is always a possibility that the auditor's opinion is wrong. But I still have not understood its two further classifications i.e, Inherent Risk and Control Risk.
Plz dont reproduce the contents of Auditing Standards.

I got Millechamp's Auditing along with Autiting Standards, is it useful, because the latest edition is not available.

Ace

[sharjeelbutt]

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

[maani]

Thanks Sharjeel, your reply is useful for me. I also found this link about the concept of audit risk and is also very useful.

Ace