What is your own risk?
As far as the audit is concerned, there is a risk that part of the company's accounting process will be defective or incorrect. This risk is separated from the control risk, which is affected by secondary checks set out in the company's accounting process. Inherent risk may occur due to human factors, such as potential mistakes of employees or unintentional mistakes in accounting practices. Also, factoring to such a risk is the nature of the business concerned and the types of measured accounts. These mistakes may be obviously extremely harmful to the overall position of society. The company can be financially affected by any tax sanctions and can be influenced by the sloppy false accounting breeds with customers and investors. For these reasons, the auditors will assess their own risk of the beginning of the audit process by the company's financial procedures.
Inherent risk is a type of risk that cannot be avoided for any large belowno one. The auditors usually perform a conservative assessment of such a risk because it is not possible to predict exactly how much it exists. In contrast, the control risk can be safely assessed by an auditor. Ideally, the company can reduce the overall risk of virtually nothing by involving internal checks of all accounting procedures. The absence of these controls would be 100 percent of the control risk, although it is not realistic to think that all financial practices would be defective.
Determination of inherent risk is often a subjective process for auditors, as it often depends on the reliability of employees responsible for finance in society. The auditor must assess whether these employees can trust the right financial report. Their reliability can be endangered by time limitations, pressure from upper management to bring positive results or even simple inability.
The amount of own risk associated with the company's accounting also depends on what dRuh's business is and how its wealth is measured. For example, if the company has most of its wealth in cash, it would be difficult to distort and the risk would be relatively low. On the other hand, a society whose wealth depends on inaccurate share, such as receivables or valuation of stocks, can more likely to distort such wealth.