The auditor may decide NOT to reduce assessed control risk even if internal controls are adequate. This approach is followed if:
A) the cost of the study and tests of controls will exceed the savings from reduced substantive procedures.
B) the auditor plans to rely on the controls and reduce substantive testing.
C) a qualified opinion will be issued.
D) All of the above are true.

Question

Quizplus · Accepted Answer

The cost of testing controls should always be considered in relation to the potential savings from reducing substantive procedures. If the cost of testing controls exceeds the potential savings, it may be more cost-effective to perform substantive testing without reducing assessed control risk. However, if internal controls are deemed effective and the cost of testing is reasonable, the auditor should plan to rely on the controls and reduce substantive testing. A qualified opinion would not be relevant to this decision.

The Auditor May Decide NOT to Reduce Assessed Control Risk