After considering a client's internal controls, an auditor has concluded that it is well designed and is functioning as intended. Under these circumstances the auditor would most likely:
A) perform tests of controls to the extent outlined in the audit program.
B) determine the control procedures that should prevent or detect errors and irregularities.
C) not increase the extent of predetermined substantive tests.
D) determine whether transactions are recorded to permit preparation of financial statements in conformity with generally accepted accounting principles.

Question

Quizplus · Accepted Answer

If the auditor has determined that the internal controls are well designed and functioning as intended, there is no need to increase the extent of predetermined substantive tests. The auditor can rely on the internal controls to effectively prevent and detect errors and irregularities, and can perform tests of controls as outlined in the audit program without increasing their extent. Options A and B are not the best choices in this scenario as they focus on determining control procedures and performing tests of controls, which have already been done and established to be effective. Option D is not relevant to the auditor's conclusion about the internal controls.

After Considering a Client's Internal Controls, an Auditor Has Concluded