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ACCAACCA AA Cheat Sheet: Audit Risk, Evidence and Reporting
ExpertMinds Editorial·3 June 2026·8 min read
Practice ACCA questions while you read →Key fact:AA exam: 3-hour CBE · 100 marks · Sections A, B (OT) + Section C (2 questions, 50 marks). Pass rate March 2026: 43% — one of the harder Applied Skills papers. Section C heavily tests professional scepticism in written answers.
Audit Risk Model
| Component | Definition | Auditor's control over it |
|---|---|---|
| Inherent risk (IR) | Risk of material misstatement before controls — related to nature of the item | Cannot be changed — assessed only |
| Control risk (CR) | Risk that client's internal controls fail to prevent or detect misstatement | Cannot be changed — assessed only |
| Detection risk (DR) | Risk that auditor's procedures fail to detect remaining misstatement | The only component the auditor can control |
| Audit risk (AR) | AR = IR × CR × DR | Manage DR to achieve acceptable overall AR |
Tip:When IR and CR are high (high combined risk), the auditor must set DR low — meaning more extensive, reliable procedures. When combined risk is low, DR can be higher — less evidence needed. This inverse relationship is the core of risk-based auditing.
Financial Statement Assertions (ISA 315)
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| For transactions (P&L) | For balances (SoFP) |
|---|---|
| Occurrence — transactions happened and relate to the entity | Existence — assets, liabilities exist at period end |
| Completeness — all transactions recorded | Completeness — all balances included |
| Accuracy — amounts correctly stated | Rights and obligations — entity has rights/obligations |
| Cut-off — transactions in correct period | Valuation and allocation — balances at correct amounts |
| Classification — transactions in correct accounts | Classification — correctly classified and described |
Audit Evidence Procedures (AEIOU)
| Procedure | What it tests best |
|---|---|
| Inspection of documents | Existence, occurrence, accuracy, rights |
| Observation | Existence (e.g., inventory count), controls operating |
| External confirmation (circularisation) | Existence, rights and obligations (receivables, bank) |
| Recalculation | Accuracy, valuation |
| Reperformance | Controls effectiveness |
| Analytical procedures | Completeness, accuracy — useful for identifying unusual fluctuations |
| Enquiry | Low standalone reliability — always corroborate with other procedures |
Audit Report Modifications
| Opinion type | Reason | Effect on report |
|---|---|---|
| Emphasis of Matter (not a modification) | Significant uncertainty properly disclosed (e.g., going concern) | Unmodified opinion; extra paragraph draws attention |
| Qualified (except for) | Material but not pervasive misstatement OR limitation on scope | "Except for" the matter, statements give true and fair view |
| Adverse | Misstatement that is material AND pervasive | Statements do NOT give true and fair view |
| Disclaimer of opinion | Limitation on scope that is material AND pervasive | Unable to form an opinion |
Practise AA audit risk questions
AA Section C marks require structured identification of risks with responses. Build exam technique with worked questions.
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