Based on a study and evaluation completed at an interim date, the auditor concludes that no significant internal accounting control weaknesses exist. The records and procedures would most likely be tested again at year-end if:
A) the internal accounting control system provides a basis for reliance in reducing the extent of substantive testing.
B) tests of controls were not performed by the internal auditor during the remaining period.
C) inquiries and observations lead the auditor to believe that conditions have changed.
D) the auditor used non-statistical sampling during interim compliance testing.

Question

Quizplus · Accepted Answer

The auditor should retest the internal accounting control system if inquiries and observations lead the auditor to believe that conditions have changed since the previous evaluation. This ensures that any new weaknesses in the system are identified and addressed. Option A is incorrect because the existence of a reliable internal accounting control system may minimize the amount of substantive testing required, but it does not, in itself, necessitate a retest. Option B is incorrect because the lack of testing by the internal auditor does not necessarily imply a need for retesting by the external auditor. Option D is incorrect because the method of sampling used during interim compliance testing is not relevant to the decision to retest.

Based on a Study and Evaluation Completed at an Interim