ICAEW ARF · Chapter 12 · Question 1 of 9
Which of the following best describes business risk, as distinct from the components of audit risk?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The risk that conditions, events or actions could adversely affect the entity's ability to achieve its objectives and execute its strategies
Explanation
Business risk arises from the entity's operations and environment, for example new competitors, loss of key customers or technological change, and threatens its ability to meet its objectives. Many business risks have financial consequences and so increase the risk of material misstatement. Option A describes audit risk, option B detection risk and option C control risk.
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