ACCA Audit and Assurance (F8) Practice Exam

Which aspect of the Risk Assessment should particularly be documented?

1. Discussions between clients

2. Identified risks and related evaluated controls

3. Personal thoughts of the auditor

4. General audit team feedback

The correct answer is: Identified risks and related evaluated controls

Documenting identified risks and related evaluated controls is essential in the risk assessment phase of an audit for several reasons. First, it ensures that the auditor has a clear understanding of the potential areas where material misstatements could occur and how those risks are addressed by the client's internal controls. This documentation serves as a key component of the audit trail that allows both internal and external reviewers to understand the rationale behind the auditor’s conclusions and decisions regarding the audit approach. Moreover, properly documenting these aspects ensures compliance with auditing standards, which typically emphasize the importance of understanding an entity’s environment and its internal control systems. Additionally, having a clear record of risks and evaluated controls aids in the planning of the audit strategy and the allocation of resources, making it more efficient and effective. This documentation can also support discussions with relevant stakeholders or when addressing issues that may arise during the audit. In summary, focusing on the documentation of identified risks and evaluated controls is paramount for ensuring thoroughness and compliance in the risk assessment process of an audit.