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Hi,
This is more a general question.
There’s pretty much always 2 written questions on identify the audit risks and identify the deficiencies. What is the difference because they seem very similar? Is deficiency more where there’s a weakness in internal controls? Where as risk is where there’s chance of the statements being misstated?
Thanks,
They are entirely DIFFERENT – drawn from different areas of the syllabus – requiring completely different answers.
LOOK at the overview at the beginning of Chapters 7/8 of the notes:
https://opentuition.com/acca/aaAudit risk Qs are about identifying/assessing the risk of material misstatement (RoMM) in the financial statements … and from that planning how the auditor is to respond to that risk. As explained on page 50, there are two approaches …. one involves testing controls, the other (“fully substantive”) does not.
Then …
See on page 56 … there are two components of RoMM:
– inherent risk …. this is the main part of an audit risk question; and
– control risk.Yes “deficiencies” in the exam is referring to weaknesses in controls. There is no point in the auditor planning to test controls that aren’t operating effectively or don’t even exist (!) So an auditor must be able to look at an accounting system (purchases/sales/payroll … see Chapter 13) and identify apparent deficiencies.
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