Audit Risk Model (Audit, Inherent, Control & Detection Risks)

AUDIT RISK MODEL (AUDIT, INHERENT, CONTROL & DETECTION RISKS In order to be able to provide reasonable assurance (that is less than absolute or 100%), the auditor must reduce the risk of giving an incorrect opinion (AUDIT RISK) to an acceptable level. To reduce such risk to an acceptable level, the auditor makes an assessment of the audit client's RISK OF MATERIAL MISSTATEMENT, which consists of the INHERENT AND CONTROL RISKS, and then designs the OVERALL AUDIT STRATEGY in order to set the DETECTION RISK at a level that will enable the auditor to maintain the OVERALL AUDIT RISK to the acceptable level. INHERENT RISK pertains to the risk of material misstatement existing in the financial statements prior to consideration of internal controls, while CONTROL RISK pertains to the possibility that the audit client's INTERNAL CONTROLS will not be able to prevent, detect or correct errors and/or fraud which may be causing material misstatements in the financial statements. --- INVENTORY ESTIMATION By: Accounting Iksimplified Link:    • Inventory Estimation using the Gross Profi...   --- WHAT IS THE CPA RECIPE? The CPA Board Exam is probably one of the toughest licensure exams in the Philippines. That's why we aim to help students have a good fundamental accounting skillset to help them in their CPA journey. In this series of lectures by The CPA Recipe, we discuss the basics of accounting in a fun, easy to understand, and engaging way. ----------- Follow us on Facebook!   / cparecipeofficial   ----------- Links to Other Episodes: Episode 1: What is Auditing? in 10 Minutes    • What is Auditing and What to Expect in Aud...   Episode 2: 5 Differences Between External and Internal Audit    • Five (5) Differences Between External Audi...   Episode 3: Generally Accepted Auditing Standards    • 10 GENERALLY ACCEPTED AUDITING STANDARDS (...   #AuditingTheory #AuditRiskModel #TheCPARecipe