To obtain an understanding of an entity's control environment, an auditor should concentrate on the substance of management's policies and procedures rather than their form because
A) management may establish appropriate policies and procedures but not act on them.
B) the board of directors may not be aware of management's attitude toward the control environment.
C) the auditor may believe that the policies and procedures are inappropriate for that particular entity.
D) the policies and procedures may be so weak that no reliance is contemplated by the auditor.

Question

Quizplus · Accepted Answer

It is important to focus on the substance of management's policies and procedures rather than their form because managers may establish appropriate policies and procedures but fail to implement them effectively. In such cases, policies and procedures may exist in form only, with little practical effect on the control environment. Therefore, the auditor should evaluate the effectiveness of the policies and procedures in place.

To Obtain an Understanding of an Entity's Control Environment, an Auditor