Business Risk

Riesanti
 Client business risk
the risk that the entity fails to achieve its
objectives or execute its strategies.

Business risk can arise from factors such as

significant changes in industry conditions or
events such as regulatory changes, or from
the setting of inappropriate objectives or
strategies.
Auditing has no effect on either the risk-
free interest rate or business risk, but
it can have a significant effect on
information risk.
 Information risk
• The reduction of information risk can have a
significant effect on the borrower’s ability to
obtain capital at a reasonable cost.
 Why business risks ?
Business risks that
impact the risk of significant Misstatements
in
the financial statements
 Important Part of Audit Planning
• Assessing acceptable audit risk
• client business risk
• risk of material misstatement
 Client business risk

the risk that the client will fail to

achieve its objectives related to

effectiveness
reliability of  compliance
and efficiency
financial with laws and
of
reporting, regulations
operations,and