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Understanding the Relationship between Business Risk and Inherent Risk

Understanding the Relationship between Business Risk and Inherent Risk Business risk and inherent risk both bear on the audit the auditrisk model and the nature, timing, and extent of work performed.Inherent risk and business risk bear an inverse relationship todetection risk and have a direct effect on the level of work performed.Neither risk can be eliminated totally and neither is controllable bythe auditor. Business risk relates to the financial statements andaffects overall audit risk inherent risk applies to an individual auditarea. Inherent risk is explicitly included in the professional standardsand the auditrisk model while business risk is not and has only anindirect bearing on the model. Management can take steps to affect thelevel of inherent risk, but the perceptions of users of the financialstatements bear on business risk. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Understanding the Relationship between Business Risk and Inherent Risk

Managerial Auditing Journal , Volume 6 (3) – Mar 1, 1991

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0268-6902
DOI
10.1108/02686909110006543
Publisher site
See Article on Publisher Site

Abstract

Business risk and inherent risk both bear on the audit the auditrisk model and the nature, timing, and extent of work performed.Inherent risk and business risk bear an inverse relationship todetection risk and have a direct effect on the level of work performed.Neither risk can be eliminated totally and neither is controllable bythe auditor. Business risk relates to the financial statements andaffects overall audit risk inherent risk applies to an individual auditarea. Inherent risk is explicitly included in the professional standardsand the auditrisk model while business risk is not and has only anindirect bearing on the model. Management can take steps to affect thelevel of inherent risk, but the perceptions of users of the financialstatements bear on business risk.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Mar 1, 1991

References