Use of Business Model In Audit Planning and Risk Assessment

- Business model shows customer value creation, key resources, key processes and profit formula (..reference..). 

- ISA 315 requires to understand the business environment and internal control of the entity, which leads to business risk and finally to business strategy

- business risk is derived from chances of failure on achievements of business strategy

- though primary concern of the auditor is audit risk and not business risk

- strategy however made by an entity, often, is vague, confidential in many cases and not much of use for the auditors 

- strategy often get too much concerned about external environment to match Opportunities with strength, if not to build strength for those opportunities 

- FS shows internal information except for some revaluations, and mark to market practices, under IFRS

- in such situations to document and to understand the environment (both internal and external) of an entity, business model can be the starting point

- business model shows how that business connect internal factors of production given state of technology with market dynamics or at-least how it plan to do so

- strategy is to fulfill that plan given by the business model 

- hence Business Model can be efficient and effective tool in Audit Planning and Risk Assessment processes