Business Risk
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VS
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Audit Risk
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Is a risk that a company cannot generate adequate
income to cover the expenses and that could hinder the hinder the achievement
of company goals and objectives.
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Definition
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Is a risk that an
auditor giving opinion based on financial statement which is inappropriate.
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·
Strategic Risk
·
Financial Risk
·
Operational Risk
·
Reputation Risk
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Type of Risk
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·
Inherent
Risk
·
Control
Risk
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Detection
Risk
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Identify
by management
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Responsible
Personal for Risk Identification
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Identify by internal and
external auditor
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Review continuously due to its recurring nature.
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Review
of risk
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Review at the time
of preparing audit reports.
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Business Risk
1. Strategic Risk
·
Totally
is making poor business decisions that affect the core of business activity. Change
in customer tastes and preferences are the main strategic risk businesses can
face which makes the company’s products and services obsolete or less desirable.
2. Financial Risk
·
Poor
in fund management which regarding on cash deficits, granting credit periods to
customers, obtaining credit periods from suppliers, and company's cash
flow cannot meet its financial obligations.
3. Operational Risk
·
Can
be result in internal event or external event inefficiencies and failures in the production floor.
Internal event such as production delays, breakdowns in internal procedures,
people and systems. For the external event such as supplier delays in
delivering raw materials.
4. Reputation Risk
·
This
is the risk resulting from loss of image of the company through customer
complaints, negative publicity, and product failures.
Audit Risk
1. Inherent Risk
·
Is
the risk of a material misstatement in the financial statements arising which error
or omission as a result of factors other than the failure of controls. Inherent
risks occur when transactions are complex, or in situations that require a high
degree of judgment in regards to financial estimates.
2. Control Risk
·
Is
the risk of materially misstating in the financial statements caused by the
lack of or failing of relevant controls in operations of the business. Internal
controls and checks and balances must be in place to prevent and alert issues
of error or fraud. Control risk will arise when the internal controls are not
adequate.
3. Detection Risk
·
Is
the risk that auditor fail to detect material misstatements relating to an
assertion in an entity's financial statements through substantive tests and
analysis. Detection risk can be reduced by
auditors by increasing the number of sampled transactions for detailed testing.
