Client Business Risk The risk that the client will fail to achieve its obiectives. Auditor\'s primary
concern is: The risk of material misstatements in the financial statements due to client business
risk. Management is the primary source for identifying client business risks. Explain and provide
examples
Solution
Auditors primary concern is \" The risk of material misstatements in the financial statements due
to clients business risk.\"
In such a situation, Management is the primary source for identifying client business risks
because management is the ultimate responsible persons in the concern for day to day affairs of
the business.
Examples:
Risks of material misstatement can arise from a variety of sources, including external factors,
such as conditions in the company\'s industry and environment, and company-specific factors,
such as the nature of the company, its activities, and internal control over financial reporting.
For example, external or company-specific factors can affect the judgments involved in
determining accounting estimates or create pressures to manipulate the financial statements to
achieve certain financial targets.
Also, risks of material misstatement may relate to, e.g., personnel who lack the necessary
financial reporting competencies, information systems that fail to accurately capture business
transactions, or financial reporting processes that are not adequately aligned with the
requirements in the applicable financial reporting framework..
General Principles of Intellectual Property: Concepts of Intellectual Proper...
Client Business Risk The risk that the client will fail to achieve it.pdf
1. Client Business Risk The risk that the client will fail to achieve its obiectives. Auditor's primary
concern is: The risk of material misstatements in the financial statements due to client business
risk. Management is the primary source for identifying client business risks. Explain and provide
examples
Solution
Auditors primary concern is " The risk of material misstatements in the financial statements due
to clients business risk."
In such a situation, Management is the primary source for identifying client business risks
because management is the ultimate responsible persons in the concern for day to day affairs of
the business.
Examples:
Risks of material misstatement can arise from a variety of sources, including external factors,
such as conditions in the company's industry and environment, and company-specific factors,
such as the nature of the company, its activities, and internal control over financial reporting.
For example, external or company-specific factors can affect the judgments involved in
determining accounting estimates or create pressures to manipulate the financial statements to
achieve certain financial targets.
Also, risks of material misstatement may relate to, e.g., personnel who lack the necessary
financial reporting competencies, information systems that fail to accurately capture business
transactions, or financial reporting processes that are not adequately aligned with the
requirements in the applicable financial reporting framework.
