When Might an Auditor Decide NOT to Reduce Assessed Control

question 39

Multiple Choice

When might an auditor decide NOT to reduce assessed control risk even if internal controls are adequate?

• A) The cost of the study and tests of controls will exceed the savings from reduced substantive procedures.
• B) A qualified opinion will be issued.
• C) The auditor plans to rely on the controls and reduce substantive testing.
• D) all of the above

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Definitions:

Agreed Limit

An agreed limit refers to a predetermined maximum amount that an insurance company agrees to pay out for a specific claim or coverage.

Policy Decisions

Decisions made by an organization's leadership or governing body that set its policies, determining strategic direction and actions.

Marketable Securities

Financial instruments and assets that can easily be converted into cash quickly, with high liquidity and short maturities.

Spontaneous Financing

Financing that arises naturally during the course of business operations, such as trade credit, without the need for formal negotiation or arrangements.