Auditors follow a four- step approach to reduce assessed control risk. Which order do these four steps go in? 1. Identify key controls that should reduce control risk for each transaction- related audit objective.
2) Apply the transaction- related objectives to the class of transactions being tested.
3) Develop appropriate tests of controls for all internal controls that are used to reduce the preliminary assessment of control risk below maximum (key controls).
4) For potential types of misstatements related to each transaction- related audit objective, design appropriate substantive tests of transactions.
A) 4, 1, 2, 3
B) 1, 3, 2, 4
C) 2, 1, 3, 4
D) 1, 2, 3, 4

Question

Quizplus · Accepted Answer

The correct order is to first apply the transaction-related objectives to the class of transactions being tested, then identify key controls, develop tests of controls, and finally design substantive tests for potential misstatements.

Auditors Follow a Four- Step Approach to Reduce Assessed Control