Audit Risk

There is some very helpful guidance in the examiner's reports. Here are some key points from the S/D25 examiner's report available here: https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/f8/examinersreports/aa-examiner-report-d25.pdf "Having identified and explained the risk, the next step is to provide the auditor’s response. Responses must be practical within the context of the scenario and care should be taken to ensure the response is one an auditor would take and not a management response. "Auditor responses do not have to be a detailed procedure, rather it is an approach the audit team will take. Care must be taken however, to ensure that the approach suggested actually addresses the risk identified and contains sufficient detail."

It may be helpful to consider in these terms: An audit risk is either RoMM (IR or CR) or DR. The response to RoMM at the FS level (e.g. risk that the entity may not be able to continue as a going concern) would require an entire audit program of procedures - so a "response" has to summarise the approach - i.e. evaluating management's assessment of going concern, including cash flow forecasts. For a RoMM at the assertion level - yes - the response may be very much along the lines of a substantive procedure but "Plan to perform a positive external confirmation request of trade receivable balances" is an approach rather than one substantive procedure - because there's so much more to external confirmation than simply requesting them. For detection risk - e.g. new client scenario - you would need to consider reducing non-sampling risk by having more senior staff engaged in the audit or greater supervision/review. I hope that gives you some ideas!

"...so a “response” has to summarise the approach..." That's the key point. Thank you so much!

Thanks also for sharing the link for the SD25 examiner's report. I will check it out ASAP.

You are very welcome!