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Please kindly differentiate between the three types of risks (business, audit and risk of material misstatement by using one example to bring out the three ( I mean using one scenario)
Crikey! You don’t ask much, do you!
Business risk – the risk that a business faces in its efforts to become or remain successful / viable
In Devro’s case, they identify (amongst others) the risk of a fall in availability of raw materials and have indicated the steps that they have taken to manage that risk
Risk of material misstatement is a risk from within an entity where the accounting and internal controls are not sufficiently strong to prevent a material mis-recording or mis-treatment of a transaction leading to the financial statements showing an incorrect (untrue / unfair) state of affairs / results
Audit risk, as you surely must know, is the risk that the auditor reaches an inappropriate conclusion about the results and state of affairs shown by the client’s draft financial statements and, as a result, issues an inappropriate audit opinion
Now, can I get those into one aggregated scenario?
I’m not even going to try!
OK?
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