The highest cost audit will be incurred when the auditor expected that the internal control system would:
A) have few effective controls, but client's personnel were well- trained and knowledgeable.
B) be effective, but the auditor found extensive control test deviations and significant errors during tests of transactions.
C) have few effective controls, and tests of balances found many errors.
D) be very sophisticated, and the tests of controls confirmed this.

Question

Quizplus · Accepted Answer

The highest cost audit will be incurred when the auditor expected that the internal control system would be effective, but the auditor found extensive control test deviations and significant errors during tests of transactions. This is because the auditor would need to spend more time and resources investigating and correcting the errors found, as well as performing additional testing to ensure the accuracy and completeness of the financial statements. In contrast, options A and C involve fewer effective controls, which may increase the risk of errors and fraud, but may not require extensive testing and investigation. Option D, which involves a sophisticated control system with confirmed tests of controls, may actually reduce the amount of testing and investigation needed, resulting in lower audit costs.

The Highest Cost Audit Will Be Incurred When the Auditor