There are three phases in the risk response category of the audit process (design further audit procedures, tests of control, substantive tests). When will the auditor conduct tests of controls?
A) when there are poor internal controls
B) if the auditor plans to rely upon them
C) when a substantive audit approach is selected
D) when there are low risks of material error

Question

Quizplus · Accepted Answer

The auditor will conduct tests of controls if they plan to rely upon them. Tests of controls are designed to test the effectiveness of internal controls and are conducted when auditors plan to rely on those controls to reduce the extent of substantive testing. Therefore, option B is the best choice. Option A is incorrect as poor internal controls may lead to an increased risk of material error and the need for more substantive testing. Option C may require more substantive audit procedures if the audit approach is selected, and option D is incorrect as lower risks may still require testing of controls depending on the auditor's reliance upon them.

There Are Three Phases in the Risk Response Category of the Audit