Which of the following statements is correct?
A) Since the auditor performs the analytical procedures, these will be competent evidence even if internal controls provide inaccurate data.
B) Both physical examination and mechanical accuracy are likely to be highly reliable if the internal control structure is ineffective.
C) The effectiveness of the client's internal control has a significant effect on the competence of most types of evidence.
D) Specific type of evidence is sufficient by itself to provide reliable evidence to satisfy any audit objective.

Question

Quizplus · Accepted Answer

The effectiveness of the client's internal control has a significant effect on the competence of most types of evidence. This is because internal controls provide the foundation for reliable financial data and reduce the risk of material misstatements. Therefore, the auditor's reliance on evidence such as analytical procedures, physical examination, and mechanical accuracy is heavily influenced by the quality of the client's internal control structure. Option A is incorrect because analytical procedures are affected by the accuracy of internal control data. Option B is incorrect because an ineffective internal control structure increases the risk of errors and fraud and decreases the reliability of evidence. Option D is incorrect because no single type of evidence is sufficient by itself to provide reliable evidence to satisfy any audit objective.

Which of the Following Statements Is Correct