When planning a financial statement audit, a CPA must understand audit risk and

its components. The firm of Pack & Peck evaluates the risk of material misstate$-$

ment $($RMM$)$ by disaggregating RMM into its two components: inherent risk and

control risk.

Required:

For each illustration, select the component of audit risk that is most directly illus$-$

trated. The components of audit risk may be used once, more than once, or not at all.

Components of Audit Risk:

a$.$ Control risk

b$.$ Detection risk

c$.$ Inherent risk