Question: Evaluating detection risk and audit risk involves understanding how inherent risk (IR), control risk (CR), and detection risk (DR) interact in an audit context. Scenario:

Evaluating detection risk and audit risk involves understanding how inherent risk (IR), control risk (CR), and detection risk (DR) interact in an audit context. Scenario: High Inherent Risk and Low Control Risk Inherent Risk (IR): High Control Risk (CR): Low Explanation: In this scenario, the nature of the transactions or account balances (inherent risk) is considered highly risky, possibly due to complex transactions, significant estimation uncertainty, or volatile industry conditions. However, the client's internal controls are strong and effective in mitigating these risks (low control risk). Audit Approach Questions: Assess the risk of occurrence of significant misstatements given the level of risks. Evaluate detection risk. Assess audit risk

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