ACCA Advanced Audit and Assurance (AAA) Practice Exam

What is classified as non-sampling risk?

1. Errors due to sampling size

2. Incorrect conclusions due to inappropriate procedures

3. Variability in the sample results

4. Differences in the population characteristics

The correct answer is: Incorrect conclusions due to inappropriate procedures

Non-sampling risk refers to the potential for errors that arise not from the sample size or the selection of the sample itself, but from other factors during the audit process that can lead to incorrect conclusions. When inappropriate audit procedures are applied, this can result in a failure to properly assess the risk of material misstatement, leading to incorrect conclusions about the financial information being audited. In this context, the application of incorrect procedures might include using the wrong methods for substantive testing or not following proper guidelines for assessing internal controls. Such errors can happen regardless of the sample size and much more related to the auditor's judgment and the effectiveness of audit methodology used. Therefore, choosing to focus on the procedures gives rise to the classification of non-sampling risk. The other options refer to concepts that are inherently related to sampling risks or variability that would affect how sampling results are interpreted. Thus, they do not fall under the definition of non-sampling risk. Non-sampling risk is essential for auditors to recognize as it could lead to a misstatement in the overall audit outcome, regardless of how careful the sampling process may be.