The audit risk model is the foundation of any audit. This might seem like CPA 101, but are you correctly applying it to your engagements?
In doing so, your first consideration is your client’s risks of material misstatement (RMM), which is made up of inherent risk and control risk. As a reminder, inherent risk is the risk of material misstatement assuming no related controls, while control risk is the risk that your client’s controls won’t prevent or detect and correct a material misstatement. So how do you apply this to your audit?