A PA is conducting the audit of Middi Furniture Company,a medium-sized company with few effective controls and significant inherent risks.Management has decided that it is not cost-effective to implement better internal controls.What audit strategy will the PA likely select for this client?
A)combined audit approach for all transaction cycles and accounts
B)substantive audit approach for all transaction cycles and accounts
C)combined audit approach for all cycles except cash and inventory
D)substantive audit approach for all cycles except sales and payroll

Question

Quizplus · Accepted Answer

Given the lack of effective controls and significant inherent risks, the PA will likely choose a substantive audit approach for all transaction cycles and accounts. This approach involves testing the accuracy and completeness of transaction data through substantive procedures, such as analytical procedures and test of details. This approach is appropriate when internal controls are weak or non-existent, and the risk of material misstatements is high.

A PA Is Conducting the Audit of Middi Furniture Company,a