Understanding components of internal control and assessing the level of control risk are primarily used by the auditor to:
A) determine the nature, timing and extent of substantive tests for financial statement assertions.
B) modify the initial assessments of inherent risk and preliminary judgements about materiality levels.
C) ascertain whether the opportunities to allow any person to both perpetrate and conceal irregularities are minimised.
D) determine whether procedures and records concerning the safeguarding of assets are reliable.

Question

Quizplus · Accepted Answer

Understanding components of internal control and assessing the level of control risk are primarily used by the auditor to determine the nature, timing and extent of substantive tests for financial statement assertions. This is because a better understanding of the internal control system and the level of control risk enables the auditor to determine the extent of testing needed to obtain sufficient audit evidence to support their opinion on the financial statements.

Understanding Components of Internal Control and Assessing the Level of Control