Week 3 - Audit Risk Calculation

Question 1

If inherent and control risk are high, what do we need to do to detection risk?

Answer 1

Try and make it lower

Question 2

How do you decrease detection risk?

Answer 2

Increase the amount of sampling you do - more audit work needed

Question 3

If inherent risk and control risk are low, what can we do to detection risk?

Answer 3

We can afford to have it a little bit higher - less audit work needed because overall audit risk will be manageable