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I was so confused with what the examiner’s answer to ‘evaluate the risk of material misstatement’ and ‘evaluate the audit risk identified’. And my Qs were as follows:
1.what is the difference between them.(BTW,I think the only difference between them is the detection risk. so in general, the answer to them are very similar.am I right?)
2.how can I show the examiner that I understand what she really want.thx ~
I used to have the same problem.
Here is what I learnt:
– audit risk is the risk that the auditor messes up the audit
– risk of material misstatement is a subset of audit risk.
– it focuses on why the accounts might be wrong so its primarily Fin.reporting (and controls)
– so you must mention the effects on assets, liabilities, profits etc in answerAbout the exam:
I don’t think both will ever be in one question as the answer will be redundant.
The largest part of audit risk that comes up in the exam is ROMM with very little control or detection risk.
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