ACCA Strategic Business Leader (SBL) Practice Exam

What is a benefit of using an external audit to assess risk?

1. Less time-consuming

2. Greater cost

3. Independent perspective

4. Familiarity with company operations

The correct answer is: Independent perspective

Using an external audit to assess risk provides the benefit of an independent perspective, which is crucial for several reasons. An external auditor is not influenced by the company’s internal politics or biases, allowing them to provide an objective evaluation of the risks facing the organization. This independent viewpoint can help identify risks that may be overlooked by individuals within the company, who might be too familiar with the established processes or overly optimistic about their effectiveness. Moreover, external auditors typically have a broad range of experience across various industries and companies, which can enhance their ability to recognize potential risks and offer recommendations based on best practices. Their independence reinforces stakeholder confidence, as external perspectives are often viewed as more credible by investors, regulators, and other interested parties, leading to a more reliable assessment of risk. In contrast, options focusing on less time consumption, greater costs, or familiarity with company operations do not highlight the significant value that an independent perspective brings to the risk assessment process. While internal resources may be more familiar with the specifics of operations, they might lack the objectivity that is essential for a thorough risk evaluation. The emphasis on independent scrutiny is what sets external audits apart as a robust tool for risk assessment.