[Anonymous]

Hi,

So I know this should be kind of basic and not too hard to figure out, but I tend to struggle quite a bit when I get questions giving me scenarios in a business and how control risk/inherent risk will be affected. Can someone please give me tips on how they think about these questions and how you come to your answers? Is there a relationship between the two (i.e both go up or both go down or neither affects the other??). An example of a question would be “suppose a company started engaging in many derivative transactions throughout the year. To combat the potential for mistatements and to help understand the complexities of the transactions, the company also hired a derivative specialist to help facilitate these transactions. Based on this scenario, how is control risk affected and how is inherent risk affected?” I would think that even though the company hired a specialist to facilitate the recording of the transactions, inherent and control risk would both increase due to inherent nature and complexity of the transactions. Thoughts?