If internal controls over cash-related transactions are adequate, the auditor is justified in reducing the audit tests for the year-end bank reconciliation.

Question

Quizplus · Accepted Answer

If internal controls over cash-related transactions are adequate, the risk of material misstatement in the year-end bank reconciliation is lower, and therefore the auditor can reduce the extent of audit tests relating to cash. However, the extent of the reduction in audit work will depend on the auditor's assessment of the adequacy and effectiveness of the internal controls.

If Internal Controls Over Cash-Related Transactions Are Adequate, the Auditor