In the substantive approach, if there is no internal control in place, the auditors _______.
A)assess RMM as high since both inherent and control risk are high
B)assess inherent and detective risk as high
C)assess control and detective risk as high
D)issue a qualified opinion

Question

Quizplus · Accepted Answer

In the substantive approach, if there is no internal control in place, auditors assess the Risk of Material Misstatement (RMM) as high because both inherent risk (the susceptibility of an assertion to a material misstatement, assuming there are no related controls) and control risk (the risk that a misstatement that could occur in an assertion and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control) are considered high. This is because the absence of internal controls increases the likelihood of errors or fraud going undetected.

In the Substantive Approach, If There Is No Internal Control