Explain the term ‘audit risk’ and the three elements of risk that contribute to total audit risk?

Audit Risk is an auditor expresses an inappropriate opinion on the financial statements

1. Inherent Risk is the risk of a material misstatement in the financial statements arising due to error or omission as a result of factors other than the failure of controls (factors that may cause a misstatement due to absence or lapse of controls are considered separately in the assessment of control 

2.Control Risk is the risk of a material misstatement in the financial statements arising due to absence or failure in the operation of relevant controls of the entity.

3. Detection Risk is the risk that the auditors fail to detect a material misstatement in the financial statements

Audit risk is the risk that the auditor could expresses an inappropriate opinion about financial statements. And this inappropriate opinion could affect the shareholders perception about the financial statements when the financial statement materially misstated.

The Factors of the Audit risk are;

Control risk

Inherent risk

Detection risk

And it could need much more time to describe

Audit risk is the risk that may auditor expresses an inappropriate audit openion when the financial statement materially misstated.

Three factors contribute audit risk which are.

Control risk

Inherent risk

Detection risk