Enter the inherent risk, control risk, and detection risk into the calculator to determine the audit risk.
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
Audit Risk Definition
Audit risk is defined as a total risk associated with the error within an audit.
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.