Question

why does low transaction volume cause control risk to increase?

Answer 1

Control risk, which is the risk that a misstatement due to error or fraud that could occur in an assertion and that could be material, individually or in combination with other misstatements, will not be prevented or detected on a timely basis by the company's internal control.

Finding a high transaction value including in fraud is easy in auditing whereas finding a low transaction value is very difficult.

Auditing is done by basing on sampling in the large entities.

In that sampling we will consider mostly high transaction values for audit purpose, but chances for checking a low transaction value is low.

So there will be a risk of low transaction value. Finding the intentional fraud in the low transaction volume is very difficult. Intentional error is always difficult to find but if that intentional error is in the low transaction values it will become very very difficult task. So the control risk will get increased.

Hence we can say that Low transaction volume cause control risk to increase.