ACCA Audit and Assurance (F8) Practice Exam

How can an auditor reduce audit risk effectively?

1. Ignore professional judgment

2. Assign less experienced staff

3. Emphasize professional skepticism

4. Limit the scope of the audit

The correct answer is: Emphasize professional skepticism

Emphasizing professional skepticism is a fundamental approach that auditors can use to effectively reduce audit risk. Professional skepticism involves maintaining an attitude of questioning, a critical assessment of audit evidence, and a cautious approach to assumptions made by management. This mindset enables auditors to critically evaluate the information presented to them and consider the possibility of misstatements, whether due to error or fraud. When auditors practice professional skepticism, they are less likely to accept documents or management representations at face value. They will delve deeper into the evidence, look for corroborating information, and remain vigilant for inconsistencies or unusual transactions. This thorough examination helps in identifying potential risks that might otherwise go unnoticed, therefore reducing the risk of material misstatements in the financial statements. By fostering a culture of professional skepticism throughout the audit process, auditors can enhance the quality of their work and make more informed judgments about the appropriateness of the accounting policies and the overall reliability of the financial statements. Other approaches, such as limiting the scope of the audit or assigning less experienced staff, may unintentionally increase audit risk by restricting the breadth of the audit procedures or lacking the necessary expertise to evaluate complex issues. Ignoring professional judgment directly undermines the audit process, making it essential for auditors to rely on their training,