ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional liability

Orchard & Vale, an audit firm, wants to reduce its exposure to negligence claims from audits of listed clients. Which action is most likely to be an effective risk management measure, in addition to holding PII?

Effective risk management includes engagement quality reviews, consultation on difficult matters and properly documented judgements and scepticism. These reduce the chance of audit failure and support the firm's defence if sued. Blanket disclaimers, junior delegation of complex areas and poor documentation increase rather than reduce exposure.

1. AUsing engagement quality reviews, consultation on difficult issues and documented professional scepticism on higher risk auditsCorrect
2. BIssuing all audit reports with a general disclaimer stating the firm accepts no responsibility for any user
3. CDelegating all complex judgement areas to junior staff to spread responsibility across the team
4. DAvoiding documentation of disagreements with management so that no evidence of concerns exists