Control Risk

Control risk is the possibility that a company's internal processes and controls might fail to prevent or detect errors, fraud, or irregularities in financial reporting. It reflects the effectiveness of a company’s systems, policies, and procedures designed to ensure accurate and reliable financial information. When control risk is high, there's a greater chance that inconsistencies or fraudulent activities could go unnoticed, which could impact the accuracy of financial statements. Auditors assess control risk to determine how much they need to test and verify the company's financial data during an audit.