ACCA Advanced Audit and Assurance (AAA) Practice Exam

ISA 330's primary focus is on which aspect of audit risk?

1. Assessing inherent risk

2. Responding to assessed risks

3. Desk reviews of prior audits

4. Monitoring internal controls

The correct answer is: Responding to assessed risks

ISA 330 specifically addresses the auditor's responses to assessed risks of material misstatement in the financial statements. The primary focus of this standard is on how auditors should design and implement responses to the risks identified during the risk assessment process. After the auditor has assessed the risks, including the inherent and control risks, ISA 330 provides guidance on how to respond appropriately to these risks through various procedures, such as additional substantive testing or enhancing the nature and timing of audit procedures. This ensures that the auditor obtains sufficient appropriate audit evidence to mitigate the assessed risks and address the possibility of material misstatements. By emphasizing the auditor's responses, ISA 330 highlights the importance of tailoring the audit approach based on the identified risks rather than merely performing standard audit procedures. This response-driven methodology is critical for effective auditing and helps ensure that the audit is responsive to the actual risk profile of the entity being audited.