[watermelon]

If you are given an event, such as “Company A entered into a really complex new sales agreement in a volitile market” and asked to determine the effect it would have on detection risk, control risk and inherent risk. What would the answer be?

Would it be an increase in inherent risk and an increase in detection risk and no effect on control risk? I know that if RMM goes up then you should adjust your detection risk to go down to keep the same audit risk, but would this question be just asking what that specific event would have on your audit risk? Would your detection risk go up since the transaction is more complicated and there is now a higher risk you will not detect a material misstatement? Or is this question asking you one step further of what you should be doing to your detection risk and not just how it is being affected?

Sorry if that is confusing, but hopefully someone knows what I’m asking. Thanks!