Control risk has been assessed at 100% for your client.What audit approach will you follow?
A)a combined approach
B)a substantive approach
C)reliance on analytical review and tests of controls
D)reliance on tests of controls and tests of details

Question

Quizplus · Accepted Answer

Since control risk has been assessed at 100%, it means that the auditors cannot rely on the effectiveness of client's internal controls. Therefore, a substantive approach would be the most appropriate to test the client's account balances and transactions for misstatements. This approach involves testing the details of balances and transactions to obtain assurance on their accuracy, completeness and validity. A combined approach (Choice A) includes both tests of controls and substantive procedures, but since control risk is at the maximum, tests of controls would not add value. Reliance on analytical review and tests of controls (Choice C) would not be appropriate since controls are not reliable. Reliance on tests of controls and tests of details (Choice D) would not be appropriate since tests of controls would not add value due to the assessment of control risk at 100%.

Control Risk Has Been Assessed at 100% for Your Client