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ma’am my study text states that as a part of DIRECTION (first stage in engagement performance) the audit team members are made aware about the “RISKS” so i wanted to ask what risks is my study text referring to “Audit risks” OR “Business risks”?
It would be both – but business risks are strictly not examinable in AA – so we try not to reference them to avoid confusion. Many business risks give rise to inherent risks – e.g. trading in perishable goods carries a risk of inventory obsolescence (business risk) and the risk of inventory overstatement is high (inherent risk). But the AA exam considers only the audit risk perspective.
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