ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which component is essential in reducing audit risk?

1. Engaging the largest audit team

2. Obtaining sufficient appropriate audit evidence

3. Limiting the scope of the audit

4. Reducing client engagement duration

The correct answer is: Obtaining sufficient appropriate audit evidence

Obtaining sufficient appropriate audit evidence is crucial in reducing audit risk because the primary objective of an audit is to form an opinion on the financial statements based on the evidence gathered during the audit process. Sufficient appropriate audit evidence refers to the amount and quality of evidence gathered to support the auditor’s findings and conclusions. When auditors collect enough relevant and reliable evidence, it enhances the credibility of their audit opinion and helps to mitigate the risk of issuing an incorrect opinion due to insufficient understanding of the financial statements. It ensures that the auditor can address any identified risks of material misstatement effectively and provides a more robust foundation for their conclusions. Aspects such as engaging the largest audit team or limiting the scope of the audit may seem advantageous, but they do not directly contribute to the quality of audit evidence obtained. Engaging a larger team doesn’t inherently guarantee that they will gather sufficient evidence; it is the quality and amount of evidence that ultimately matters in mitigating audit risk. Similarly, limiting the scope of the audit could potentially omit significant areas of risk that require attention, thus increasing audit risk rather than reducing it. Reducing client engagement duration could also compromise the thoroughness of the audit due to time constraints, potentially leading to inadequate evidence gathering. Thus, focusing on obtaining sufficient