For the current year, ABC Company, a public company, has been experiencing poor performance. Industry analysts have been issuing negative reports and the company's stock price has been steadily declining. Further, they implemented a new ERP system and a number of key employees left. ABC is a recurring client and in the prior year it was noted that controls were operating effectively.

123 Corp (another client) is a private company, has been performing well, and has not historically had misstatements. As an audit partner for these clients, consider the following

1. How would you assess the audit risk for both clients?
2. When would take a reliance vs substantive approach? (Remember private vs public and the impact of risk of control and substantive testing)