Nicole Henderson is a third-year accounting student and she provides the following comments on risks. Indicate whether you agree or disagree with them respectively.
- Audit risk can be applied quantitatively or qualitatively. In essence, it is a concept used to ensure that the auditor gathers sufficient evidence to render an opinion on the financial report with little likelihood of being wrong.
- Control risk refers to both the design of controls and the operation of controls. To assess control risk as low, the auditor must gather evidence on both the design and operation of controls.
- Audit risk should vary inversely with engagement risk: The higher the risk with being associated with the client, the lower should be the audit risk taken.
- In analyzing the audit risk model, it is important to understand that much of it is judgmental. For example, setting audit risk is judgmental, assessing inherent and control risk is judgmental and setting detection risk is simply a matter of the individual risk preferences of the auditor.