It may be easy to identify and extract the transactions with high inherent risk in a data file on the basis of date, voucher type, pool and other such information.
Inherent risks can realize in errors, frauds, and other irregularities.
The risks realize with greater propability when controls are not adequate or they are not functioning as intended. The word 'controls' refers here to control environment, accounting systems and control activities. Normally auditor first identifies controls, and then evaluates and tests them in terms of adequacy and effectiveness. However, there are limitations in the effectiveness of evaluations and tests. It is a fact, too, that even good controls can be circumvented through collusion of two or more persons.