In which of the following situations will auditors typically rely on internal controls over financial reporting?
A)If control risk is assessed at a high level.
B)If the controls are determined to be designed and operating effectively.
C)If the client asks the auditor to test controls.
D)If the controls are sufficient to increase control risk to an acceptable level.

Question

Quizplus · Accepted Answer

If the controls are determined to be designed and operating effectively, auditors can rely on them to reduce control risk and perform substantive procedures with a lower level of detection risk. However, if control risk is assessed at a high level, the auditor will need to perform more extensive substantive procedures to obtain sufficient evidence. Option A is incorrect because a high level of control risk implies that the auditor cannot rely on the internal controls. Option C is incorrect because the client's request to test controls may not be sufficient to reduce control risk to an acceptable level. Option D is incorrect because controls that increase control risk are not useful for auditors.

In Which of the Following Situations Will Auditors Typically Rely