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hello Mike
i understand the difference between Risk of MM and Audit Risk since audit risk contains the element of detection risk and risk of mm is basically before the audit and contains inherent and control risk.
however when answering audit risk questions and risk of mm questions then am i right in saying that there is one similar approach between the two which we have to adopt because we state the correct accounting rule and comment on the under and overstatement of assets, expenses, profits and liabilities? this approach applies to both audit risk questions and risk of mm questions but in audit risk questions, we also need to spot detection risk such as the risk of new client which increases the detection risk because of auditors lack of knowledge of the business.
is that correct?
That sounds reasonable to me, yes
Risk of material misstatement is just one specific part of audit risk so a question asking about audit risk will include risk of material misstatement but a question asking about material misstatement will not necessarily include all elements of audit risk
OK?
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