When a compensating control exists, the absence of a key control
A) is no longer a concern because there is no longer a significant deficiency or material weakness.
B) is still a major concern to the auditor.
C) could cause a material loss, so it must be tested using substantive procedures.
D) is magnified and must be removed from the sampling process and examined in its entirety.

Question

Quizplus · Accepted Answer

A compensating control mitigates the risk associated with a key control and reduces the likelihood of a material misstatement. As a result, the absence of a key control is no longer a concern because the compensating control effectively takes its place. Therefore, there is no longer a significant deficiency or material weakness.

When a Compensating Control Exists, the Absence of a Key