ACCA Audit and Assurance (F8) Practice Exam

Which of the following is NOT a risk assessment procedure in auditing?

1. Inquiry

2. Analytical Procedures

3. Statistical Sampling

4. Observation and Inspection

The correct answer is: Statistical Sampling

Statistical sampling is primarily a technique used in evidential gathering rather than a risk assessment procedure. In auditing, risk assessment procedures are aimed at identifying and assessing the risks of material misstatement in the financial statements, and they help auditors understand the entity and its environment. Inquiry, analytical procedures, and observation and inspection all play a significant role in assessing risks. Inquiry involves seeking information from knowledgeable individuals within the entity, allowing auditors to understand processes or identify potential areas of risk. Analytical procedures include evaluating financial information through analysis of plausible relationships among data, which can highlight areas that might be at greater risk of misstatement. Observation and inspection involve physically examining processes or records, helping auditors to assess the risk by understanding how transactions are executed within the entity. In contrast, statistical sampling is a method of selecting and evaluating a subset of data to draw conclusions about an entire population, typically used during the testing phase of audit procedures rather than the initial risk assessment phase. Hence, it does not fit within the framework of risk assessment procedures in auditing.