Which of the following statements is correct?
A) Tests of account balances can often provide evidence about the continued functioning of controls.
B) An ineffective entity-level control environment may allow the auditor to limit their tests of controls to enquiry and observation.
C) Auditors do not need to investigate any control exceptions identified during their testing.
D) Tests of account balances never provide evidence about the continued functioning of controls.

Question

Quizplus · Accepted Answer

Tests of account balances can often provide evidence about the continued functioning of controls. When testing account balances, auditors can identify potential misstatements that may arise from control failures. Therefore, when performing substantive testing, auditors may review the effectiveness of controls that relate to the account balances being tested. For example, if the auditor identifies a significant deficiency in the control environment, they may increase their substantive testing to compensate for a lack of reliance on control testing.

Which of the Following Statements Is Correct