I. Define the following risk components Audit Risk and, Control Risk.

Audit Risk

Control Risk

II. Audit A involves a large SEC client which is very important to the audit partner; Audit B involves a small retail story which is less important to the audit partner. The audit partner will set which audit with a higher level of Audit Risk? Audit _____ III. Classify each of the following items as related to: a. audit risk; b. control risk; c. inherent risk; or d. detection risk. 1. An inexperienced staff auditor misses a material misstatement of an account. 2. The account balance is based on a large number of subjective estimates. 3. The CPA firm assigns more experienced staff to the audit of a large company, since this is a very important audit client. 4. To foster a sense of responsibility, no one checks the work of employees. 5. The auditor merely asks the controller if the financial statements are correct. No other work is done.