Principle audit risks

Financial and business risks affect the company rather than the auditors.

The auditors are (or, at least, they should be) concerned about the possibility of issuing an inappropriate opinion.

The directors should be concerned about (inter alia) financial risk, interest risk, credit risk, reputation risk, legal risk, non-compliance risk ……..)

Sure, if the company isn’t on top of these risks and isn’t managing them appropriately, there is the possibility of early liquidation preceded by a status of non-going concern so that could have been a situation where the auditor neded to be aware of the possibility.

But these are not elements of the primary equation (ROMM x Detection Risk = Audit Risk) unless you’re going to argue that these risks facing the company are themselves integral elements of risk of material misstatement (inherent risk and control risk)

Is that better?

Is there any reason why you couldn’t cover both bases?

Under a heading within your answer you could identify RMMs and, as an introduction to that list, you could state that both inherent and control risks, as integral elements of RMM, are of major concern to the auditor in their assessment of audit risk and their determination of the acceptable level of detection risk in order to reduce as much as reasonably possible the chance of issuing an inappropriate opinion

Personally, I would go for more rather than less. It may be that I could be accused of failing to focus on a question or of including matters beyond the question requirements but I would rather be in that position than fall foul of not including something that I knew and that could have earned me that crucial extra mark to take me from 49% to 50%