Audit risk
- Term
- Audit risk
- Exam
- CISA
- Definition
The risk that the auditor reaches an incorrect conclusion. It is a product of inherent, control and detection risk.
- Explained
Audit risk combines three components: inherent risk in the subject, control risk that the organization's controls fail, and detection risk that the auditor's procedures miss what is wrong. The auditor cannot change the first two, so a high assessment of inherent or control risk is answered by reducing detection risk — more, better or later testing.
- In practice
An auditor tests too few payments and concludes controls are effective when duplicate payments are slipping through.
- Often confused with
- Business risk
- Exam angle
The auditor can only control detection risk.
- Related