A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probably:

Question

Quizplus · Accepted Answer

Choice "B" is correct. The assessment of control risk affects the nature, timing, and extent of substantive audit procedures. If the assessed level of control risk is high, the auditor would generally request that the client schedule the inventory at the end of the year. Choice "A" is incorrect. If the assessed level of control risk is high, an auditor would probably increase the extent of substantive testing, not the extent of tests of controls. Choice "C" is incorrect. Client performance of physical counts is an effective internal control, but requesting multiple inventory counts through the year is not an appropriate reaction to the auditor's assessment of control risk as high. The assessment of control risk affects the nature, timing, and extent of substantive audit procedures. Choice "D" is incorrect. The assessment of control risk affects the nature, timing, and extent of substantive audit procedures. Given the high assessment of control risk, the auditor would prefer more effective substantive procedures; analytical procedures are generally less effective.

A Client Maintains Perpetual Inventory Records in Both Quantities and Dollars