Which of the following statements about understanding internal control is not true:
A) The auditor uses the knowledge of the system of internal control to design further audit procedures to collect evidence.
B) In the presence of a strong system of internal control, the auditor may choose to collect less evidence about transactions or balances.
C) In the audit of a private company, it is necessary to express an opinion on the system of internal control over financial reporting.
D) A thorough understanding of the system of internal control assists the auditor in identifying potential types of misstatements.
E) A thorough understanding of the system of internal control assists the auditor in understanding the risk of material misstatements.

Question

Quizplus · Accepted Answer

In the audit of a private company, expressing an opinion on the system of internal control over financial reporting is not a necessary requirement. This requirement is specific to public companies under certain jurisdictions, such as the United States, where auditors are required to express an opinion on the effectiveness of internal control over financial reporting under the Sarbanes-Oxley Act. For private companies, the focus of the audit is on the financial statements themselves, not on the effectiveness of internal controls.

Which of the Following Statements About Understanding Internal Control Is