(b) Audit Risk at the Account Balance Level and at the Class of Transactions Level:

Majority of audit procedures are directed to and carried out at the account balance level  and the class of transactions level. At these levels, the auditor uses professional judgment to evaluate numerous factors to assess inherent risk-
Inherent audit risk at the level of Account Balance and Class of Transactions is:

1. Financial statements are likely to be susceptible to misstatement, for example, accounts which required adjustment in the prior period(Interest Expense of 5 months was inappropriately capitalised even after completion of construction) or which involve a high degree of estimation / Judgement.(Provision for Litigation)

1. Susceptibility of assets to loss or misappropriation, for example, assets which are highly desirable and movable such as cash. (Wages Payment in Construction Company)

1. The complexity of underlying transactions and other events which might require using the work of an expert. (Computation of Number of Shares in ESOP Scheme)

1. The completion of unusual and complex transactions, particularly at or near period end.(Demerger / Sale & Lease Back)

1. The amount of judgment involved in determining account balances