For the current year, ABC Company, a public company, has been experiencing poor performance. Industry analysts have been issuing negative reports and the company's stock price has been steadily declining. Further, they implemented a new ERP system, and a number of key employees left. ABC is a recurring client and in the prior year, it was noted that controls were operating effectively.

123 Corp (another client) is a private company, that has been performing well and has not historically had misstatements. As an audit partner for these clients, consider the following –

1. How would you assess the audit risk for both clients?
2. When would take a reliance vs substantive approach? (Remember private vs public and the impact of risk of control and substantive testing)

Answer rating: 100% (QA)

Explanation Audit risk is the inverse of audit assurance It is the risk that the auditor is willing ... View the full answer