Acca aa s21 Notes

respond
to the assessed risks by varying the nature, timing and extent of work 
which is actually performed to 
reduce
detection risk to an acceptably low level.
For example:
๏
obtaining more reliable or corroborative evidence 
(nature)
;
๏
performing audit procedures on the reporting date rather than during the later final audit 
(timing)
;
๏
increasing sample sizes 
(extent)
.
September 2021 to June 2022 exams
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Detection risk has two components:
๏
Sampling risk 
 
This risk arises when audit procedures are applied to samples rather 
than entire populations. The auditor may conclude, based on a 
sample, that controls are more effective than they actually are or 
that there is no material misstatement when, in fact, there is. The 
auditor may then be doing too little work so that actual 
misstatements go undetected. Sampling risk can be reduced by 
examining larger samples.
๏
Non-sampling risk 
 
This
 
risk arises from reasons other than sample size. For example, 
audit staff were insufficiently experienced, there is a higher risk that 
they might use inappropriate audit procedures, misinterpret 
evidence or fail to recognise an error. Non-sampling risk must be 
minimised through adequate planning, assigning sufficiently skilled 
staff and the direction, supervision and review of their work.
4. Examples of the types of risk
Let’s look at the three main components of the audit risk model in a little bit more detail.
๏