3). Define project risk and risk audits.

Differentiate the qualitative risk analysis and

quantitative risk analysis process.[3+2]

Project risk is the potential of a project to fail. There are three main types of project risks:
cost, schedule, and performance.

Cost: The cost can be a financial cost or even a time-based one. A risk could be due to the
budget being too tight or the project taking too long to complete.

Schedule: The schedule is an important factor that affects the project's success. A risk could
be due to the lack of resources, a lack of quality work, or even miscommunication between
parties involved in the project.

Performance: Performance issues are what keep projects from being successful.
Performance includes everything from how well it performs in terms of speed and accuracy
to how well it's received by its target audience.

Audit risk, which is synonymous to residual risk, can be defined as the risks that the auditor
doesn’t take cognizance of during the process of evaluating the financial statements of an
organization or a person. These risks could be errors, miscalculations, etc.

Below are the types of audit risks:

1. Inherent Risk
This is the type of audit risk that can’t be identified by anybody, be it the internal auditor of the
company, or other financial officials. To stop the audit risk components, companies will have to
make the necessary plans and adopt effective measures to detect any issues.

2. Detection Risk
This type of risk occurs as a result of improper planning. There is a slim chance that an auditor
will not spot the necessary misstatements and correct them in time before the audit. When the
financial team of a company sum up materials, there is a chance that some aspects were
erroneously gathered, be it by missing information or with incorrect calculations.

3. Control Risk
This type of risk is an audit risk that examines the correctness of the values stated by the
employees of a company. A company can inadvertently commit fraud by erroneously reporting
figures or misjudging numbers. Indicating areas where these errors exist is essential to identify
this type of risk.