ACCA Strategic Professional · Advanced Audit and Assurance (International) · Planning, materiality and assessing the risk of material misstatement

During planning of Orion Components' audit, the auditor assesses risk of material misstatement for trade receivables existence as high because of weak credit control. Later, controls testing shows the key controls operate effectively. Which statement best reflects the correct treatment under ISA 315 (Revised 2019) and ISA 330?

The auditor may revise the risk assessment when evidence conflicts with it, because risk assessment is iterative. Effective controls support a lower control risk assessment, so the RMM can be reassessed and further audit procedures modified accordingly. The original assessment is not fixed once documented.

1. AThe control risk assessment may be reduced, and the auditor may reassess the RMM and modify further procedures, because the assessment can be revised as evidence is obtainedCorrect
2. BThe initial assessment is fixed once documented and cannot be changed during the audit
3. CThe auditor must still perform only substantive analytical procedures regardless of the new evidence
4. DDetection risk must be increased and the RMM must be left unchanged