Considerations Relating to Specific Inherent Risk and Control Risk

Abstract

Audit risk (Ra) occurs if financial statements belonging to the firm are majorly distorted, in which case an auditor may give a defective opinion on them. This risk depends on the risk of significant distortion (Rds) and on the risk of detection (Rd). The risk of significant distortion (Rds) takes into account the inherent risk (Ri) and the control risk (Rc). The balance of an account or more transactions may have majorly distorted values, with these falling within the scope of the inherent risk. It is in turn structured in general risk and specific risk. The concept of specific risk is apparent from aspects which take into account the practice previously acquired by the auditor and the way in which the auditor is aware of the audit areas. Assessment of the specific inherent risk and control risk shall be carried out in the following.