Audit risk - part 2

In this lesson

1. 0:00 Audit risk scenario introduction
2. 0:54 Breaking down the question requirements
3. 1:19 Understanding audit risk definition
4. 2:08 Identifying three key audit risks
5. 3:02 Explaining audit risk impact requirement
6. 3:36 New client and detection risk
7. 4:03 Inventory materiality and inherent risk
8. 6:02 New system implementation and control risk

About this lesson

We work through a practical example involving a new client with significant inventory holdings and newly implemented systems, breaking down the question requirements and showing you exactly what examiners are looking for: not just identifying risks, but explaining why they matter to the audit. You'll discover how to spot three common sources of audit risk: new clients (which increase detection risk because you lack existing knowledge of their systems), high-value inventory of electronics (which creates inherent risk through obsolescence, theft, and valuation concerns), and new computerised systems (which raise control risk until staff become familiar with processes). The lesson connects these practical risks directly to the components of audit risk—inherent, control, and detection—and shows how understanding the nature of the business and its accounting standards helps you build a convincing answer. By the end, you'll be confident recognising audit risks in exam scenarios and articulating why they matter, moving beyond simple identification to the explanations that earn marks. This approach works across all audit planning questions, whether you're dealing with new clients, complex inventory, or system changes.

Duration: 7m