Auditors test the operating effectiveness of internal controls only if they
A) are effectively designed to prevent or detect material misstatements.
B) address multiple risk factors.
C) are applied in conjunction with other controls to address a single risk factor.
D) cause susceptibility to material misstatements.

Question

Quizplus · Accepted Answer

Auditors need to test the operating effectiveness of internal controls only if they are effectively designed to prevent or detect material misstatements. If internal controls are not effective, there is a higher risk of material misstatements, which the auditor needs to identify and report. Therefore, the auditor needs to ensure that the internal controls are designed to address the specific risk of material misstatement and are implemented effectively to reduce the risk to an acceptable level. If the controls are designed effectively and operating as intended, then the auditor can rely on them to reduce the risk of material misstatements.

Auditors Test the Operating Effectiveness of Internal Controls Only If