Compliance risk
Compliance risk is the possibility that an entity fails to comply with applicable laws, regulations or internal requirements. The auditor considers whether a breach or suspected breach could affect the financial statements and determines the response under relevant auditing and ethical requirements. Different rules have different financial reporting implications.
Worked example
A new environmental permit requirement may expose a company to fines; the auditor considers relevant evidence and financial statement implications.
Common mistake
A business compliance risk is not automatically a material financial-statement misstatement or proof that non-compliance occurred.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Supporting | September 2026–June 2027 |
| ACCA | BT | Supporting | September 2026–June 2027 |
| ACCA | SBL | Direct | September 2026–June 2027 |
| FIA | FBT | Supporting | September 2026–June 2027 |