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Hello Mike,
If we are auditing a new client, I know there is an audit risk due to non-cumulative audit knowledge. But is there any risk of material misstatement for auditing a new client? or rather does this also present any ROMM?Thanks!
For a new client there is clearly an increased inherent risk leading on, therefore, to the inevitable increased risk of material misstatement
In answer to your question, “is there any risk of material misstatement for auditing a new client?” – Yes, there is a risk of material misstatement
Thanks!..In the exam though, we have to say how the ROMM can materialise, do we just use the scenario and maybe say..As they are new clients, there is an inherent risk that liabilities may be undertsated…e.t.c… as we are not very conversant with their systems?
That would do. It would help to point out that a risk of material misstatement is the product of two separate elements – inherent risk and control risk. Then go on and BRIEFLY explain the two
Then start to identify the risks that could be classed as inherent and explain why they are
Same with those that are control risks, and explain why they are
Then summarise (if that has answered the question as it was set)
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