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

Which action by an audit firm would be most effective in reducing its exposure to claims from unknown third parties who might rely on the audited financial statements?

Stating in the audit report that it is addressed solely to the members as a body is most effective, because it limits the persons to whom responsibility is assumed. Audit work changes or removing required report content do not address third-party duty.

  1. AIncluding in the audit report a clear statement that it is addressed solely to the members as a bodyCorrect
  2. BIncreasing the sample sizes on all audit tests
  3. CReducing performance materiality to zero
  4. DDeleting the key audit matters from the report

Explanation

Clear addressing of the report to members and a statement of responsibility limit the class of persons to whom the auditor assumed responsibility. Larger samples reduce audit risk but do not address third-party duty. Zero materiality is impracticable and key audit matters are required where applicable.

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