Substantive tests of transactions affect control risk but do not affect planned detection risk.

Question

Quizplus · Accepted Answer

Substantive tests of transactions are designed to detect material misstatements in the financial statements. They do not directly affect control risk, which is the risk that a misstatement that could occur in an account will not be prevented or detected and corrected on a timely basis by the entity's internal control. Instead, they affect the auditor's assessment of detection risk, which is the risk that the audit procedures will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements. Control risk is assessed independently of the audit procedures and is related to the effectiveness of the entity's internal controls.

Substantive Tests of Transactions Affect Control Risk but Do Not