Lesson: Risk Assessment in Compliance Engagements

In this lesson, Nick Palazzolo, CPA, discusses risk assessment in compliance engagements, focusing on attestation risk, which comprises inherent risk, control risk, and detection risk. He explains the factors that contribute to each risk component and emphasizes that practitioners have control over detection risk through the amount of testing performed. Furthermore, Nick delves into the need for practitioners to obtain an understanding of relevant portions of internal control over compliance to plan the engagement effectively and assess control risk. The lesson also covers the inverse relationship between the risk of material noncompliance and detection risk, explaining how it is similar to the relationship between the risk of material misstatement and detection risk.