Question

Discuss the impact of control risk assessment on an audit of the financial statements.

Answer 1

Audit risk comprises of three types of risk inherent risk, control risk and detection risk.

We are going to discuss the impact of control risk assessment on an audit of the financial statements

When there arises risk of material misstament in financial statements due to improper relevant controls of the entity. Internal control play a vital role as if intenal control is adequate then there is less possibility of errors and high chance to detect fraud early. More adequate is internal control less will be control risk will be low.

Impact of control risk assessment on financial statements will be more if work not assigned properly and if work is not rotated on period intervals as if work is rotated on intervals it will be easy to detect fraud and errors early and keep control risk at a low level.

So in order to keep control risk at low level so all above possible steps should be taken to make overall risk also low.