Auditing Basics: Audit Risk, Control Risk, and Detection Risk for SOC 1 and SOC 2 Compliance

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SOC 1 and SOC 2 audits are largely impacted by various types of risk. During a SOC 1 and SOC 2 audit, an auditor will be focused on limiting the following types of risk: audit risk, control risk, and detection risk.

So, how are those risks different? How to they affect an auditor while performing SOC 1 or SOC 2 audits?

Let’s discuss.

According to the AICPA, audit risk is “the risk that the auditor expresses an inappropriate audit opinion when financial statements are materially misstated. Audit risk is a function of the risks of material misstatement and detection risk.”  Control risk takes into account the potential for error from both humans and automated processes. Detection risk is the risk that an auditor will fail to detect something that’s in existence.

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