When an auditor has reduced assessed control risk based on tests of controls, he or she may then reduce the extent to which the accuracy of the financial statement information directly related to those controls must be supported through the accumulation of evidence using substantive tests.

Question

Quizplus · Accepted Answer

If assessed control risk is reduced based on tests of controls, it provides the auditor assurance that the control is operating effectively, which allows them to rely on the control to reduce the extent of substantive testing. This means that the auditor can reduce the amount of evidence accumulated through substantive testing in areas where the control is effective, making it more efficient to conduct the audit.

When an Auditor Has Reduced Assessed Control Risk Based on Tests