@kentucky
Ok, so first I have to thank you. I like to try and answer questions, because it forces me to apply what I have learned or at the very least pull it out of my brain.
I did a bit of research on your question, I went to the PCAOB site. I used derivatives/hedging as a general category that would increase inherent risk. Here are some details:
there would be an increase in inherent risk if a company decided to venture into derivatives/hedging to offset price fluctuations in materials or investments (especially never having done it before)
overall fluctuations in interest rate would increase inherent risk for a company that would be closely related/exposed to what their investment holdings may be, this could also extend to specific industries. For example, currently businesses related to the housing market probably have increased inherent risk.
The increase in credit risk associated with amounts due under debt securities issued by entities that operate in declining industries increases the inherent risk for valuation assertions about those securities.
I got most of this from PCAOB 332.08. I will add that I think of inherent risk similar to Beta. It is an overall risk. Think of stocks and what moves them and that is pretty much inherent risk. At least that is how I see it in my head.
In terms of Control Risk.........
if there was a change in accounting systems for a business, that might increase control risk for the auditor. Some controls may be missing in the transition, and the controls haven't been reviewed as to their effectiveness.
If a business had recently added a management override function
If a business recently had large turnovers in its internal control department
If a business had some management changes and the control environment has changed considerably
If a business began issuing credit cards for travel purposes
Ok, well that is what seems logical to me. Hope this helps. Good luck with Audit. It is MY beast. I know everybody has their own ! Now, back to Audit for me, I am reviewing internal control.
Have a great weekend.
