AAA – L3 – SA – Q1.5 – Business Risk Approach

Disadvantage of business risk audit approach.

Question

One of the disadvantages with a business risk approach to the audit is:

A A perceived conflict with auditor independence

B Increase in knowledge of the client’s business

C A reduced focus on processing errors

D More senior staff are involved

Answer

Explanation:
The business risk approach to audit requires a close involvement by the auditor in the client’s business. Some commentators fear that this erodes the auditor’s independence, making A the correct answer. Increased knowledge of the client’s business (B) and more senior staff involvement (D) are generally advantages, while a reduced focus on processing errors (C) is a potential issue but not the primary disadvantage highlighted.

Tags: Audit Strategy, Auditor Independence, Business Risk Approach, ICAG
Level: Level 3

Topic: The audit approach

Uploader: Salamat Hamid