An entity's internal controls are most relevant to the auditor when the policies and procedures:
A)affect the financial statement assertions.
B)relate to management's planning decisions.
C)address management's operating decisions.
D)reflect management's philosophy and operating style.

Question

Quizplus · Accepted Answer

An entity's internal controls directly impact the financial statement assertions, which are the auditor's primary concern. The auditor needs to evaluate the effectiveness of the internal controls in mitigating the risks of material misstatements in the financial statements. Choices B, C, and D are not as relevant to the auditor's assessment of internal controls in relation to the financial statements.

An Entity's Internal Controls Are Most Relevant to the Auditor