Enter the inherent risk, control risk, and detection risk into the calculator to determine the audit risk.
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Audit Risk Formula
The following formula is used to calculate the audit risk.
AR = IR * CR * DR
- Where AR is the audit risk
- IR is the inherent risk
- CR is the control risk
- DR is the detection risk
To calculate the total audit risk, multiply the inherent risk, control risk, and detection risk together.
Audit Risk Definition
Audit risk is defined as a total risk associated with the error within an audit.
FAQ
Audit risk is a risk that an auditor issues to an unqualified report due to the auditor’s failure to detect error or fraud.
Inherent risk is the risk involved in the nature of a certain business.
Control risk is that arises from a business’s failure of internal control mechanisms.
Detection risk is the risk that the auditing procedures may fail to detect error or fraud, such as sampling error.