In testing controls, an overreliance on internal controls that reduces substantive tests and increases the likelihood of not detecting a material misstatement occurs because:
A)true deviation in the population was less than the sample.
B)true deviation in the population was greater than the sample.
C)auditor judgment was flawed.
D)it is inherent in the audit risk model.

Question

Quizplus · Accepted Answer

An overreliance on internal controls occurs when the auditor does not perform sufficient substantive tests, relying instead on the effectiveness of internal controls to prevent material misstatements. This increases the risk of not detecting a material misstatement if the true deviation in the population is greater than the sample. Therefore, the correct answer is B. The other choices do not provide a valid explanation for why an overreliance on internal controls might increase the risk of not detecting a material misstatement during testing.

In Testing Controls, an Overreliance on Internal Controls That Reduces