If the client has well-designed, implemented, and documented controls over the preparation of accounting estimates, then an appropriate risk response would be _______.
A)to focus this audit time on another area, and conclude there is no material risk in this area
B)to test the operating effectiveness of the controls
C)to test the operating effectiveness of the assertions
D)to obtain written representation from management to this effect, which negates the need for any testing

Question

Quizplus · Accepted Answer

The appropriate risk response in this scenario would be to test the operating effectiveness of the controls to confirm that they are working as intended and effectively mitigating any risks associated with the preparation of accounting estimates. While it may be tempting to focus audit time on another area or rely solely on written representation from management, testing the controls provides the necessary evidence to support the effectiveness of the controls and reduce the overall audit risk. Testing the operating effectiveness of the assertions may also be necessary, but this would be in addition to, rather than instead of, testing the controls.

If the Client Has Well-Designed, Implemented, and Documented Controls Over