The auditor faces a risk that the audit will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on:
A) Substantive procedures.
B) Tests of controls.
C) Internal control.
D) Statistical analysis.

Question

Quizplus · Accepted Answer

Substantive procedures involve direct testing of account balances, transactions and disclosures in the financial statements. This approach helps to mitigate the risk of material misstatements in the financial statements by verifying the accuracy and completeness of the data underlying the financial statements. Tests of controls, on the other hand, help the auditor to gain an understanding of the internal control environment, but do not provide direct evidence about the accuracy of the financial statements. Internal controls and statistical analysis can also help to minimize audit risk, but they are not the primary means of detection of material misstatements.

The Auditor Faces a Risk That the Audit Will Not