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Hello
Thanks for responding previously.
I am aware of the components of both audit risk and romm but i’m trying to find out how my answer would be different for a romm as opposed to an audit risk question. As an example lets say there was a revenue cut off issue and part A of the question asks for romm while part B asks for the audit risk, what would the answer be like?
If you can give examples of the answer for both that would help alot.
It would help me to explain this better if you were to give me the reference to a specific question where this situation has arisen.
My initial thoughts are that audit risk is the risk of issuing an inappropriate opinion and that risk is the product of risk of material misstatement (romm) and detection risk
It’s not possible to disentangle the two because romm is an integral element of audit risk. It’s a bit like asking me to describe the stripes of a tiger and then describe a tiger
The concept of audit risk doesn’t exist without there being a risk of material misstatement
In the scenario that you have suggested, a cut-off problem with revenue could easily become a romm and the level of risk of an inappropriate opinion is then dependent upon the skillful auditor designing tests sufficient to reduce the level of detection risk to an acceptable figure such that audit risk is then itself within the acceptable range
It maybe that any question that you have read and that has caused confusion could be answered part (a) with a detailed consideration of the impact of over-stated revenue and part (b) with a more generalised consideration of audit risk (or any other specific problem)
Give me the reference to a question that asks for (part a) about a romm and (part b) audit risk and I’ll have a look again
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