Please enable JavaScript.
Coggle requires JavaScript to display documents.
RISK - Coggle Diagram
RISK
Business Risk
-
The possibility of the organization facing unfavorable situations and any uncertainties in their daily operations which might affect the overall health and soundness of the business
-
a natural part of any business and cannot be avoided, however there are ways to reduce the effects of these types of risks.
-
They may arise due to both external and internal reasons, which may include operational inefficiency, system error, human error, weak management, economic and political problems, natural disasters or change in market conditions
-
-
Audit Risk
-
Composed of:
Inherent risk (IR), the risk involved in the nature of business or transaction.
Control risk (CR), the risk that a misstatement may not be prevented or detected and corrected due to weakness in the entity's internal control mechanism.
Detection risk (DR), the probability that the auditing procedures may fail to detect existence of a material error or fraud.
The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
The probability that the company’s financial statements contain an error that is material to the company even though the same has been verified and audited by the company’s auditor without any qualification concerning it.
The risk of financial statements not being truly representative of an actual financial position of the organization or a deliberate attempt to conceal the facts even though audit opinion confirms that statements are free from any material misstatement.
a type of risk in the business in which the auditors may not issue a correct opinion about the true financial condition of the business. In this type of risk, the auditor may be unable to point out any misstatement in the financial statement. or unable to identify an important error or fraud. This will lead to inappropriate audit opinions about the financial statement.
May arise due to any one or both of the two – Clients or Auditors. This risk may be due to two reasons – mistakes/errors or a deliberate misstatement.
Differences
Audit risks includes factors that can cause a misstatement, error or omission in the financial statements this is directly related to the auditor.
Inept internal and external audit processes result in audit risk, business risk can occur due to several reasons relating to strategic, financial, operational, and reputational or any other industry-specific aspects.
-
