An exception in a test of control provides only an indication of the likelihood of monetary misstatements in the financial statements, because tests of controls reveal whether monetary misstatements have actually occurred.

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An exception in a test of control indicates that there is a potential for monetary misstatements in the financial statements. It does not necessarily mean that monetary misstatements have actually occurred. Tests of controls are designed to assess the operating effectiveness of controls and determine if they are being applied as intended. It is possible for a control to fail and for there to be no monetary misstatements, or for a control to appear effective when in reality there are monetary misstatements. Therefore, while an exception in a test of control is a significant finding that requires further investigation, it does not definitively reveal whether monetary misstatements have occurred.

An Exception in a Test of Control Provides Only an Indication