In which of the following situations will auditors typically rely on internal controls over financial reporting?
A) If control risk is assessed at a high level.
B) If the controls are determined to be designed and operating effectively.
C) If the clients asks the auditor to test controls.
D) If the controls are sufficient to increase control risk to an acceptable level.

Question

Quizplus · Accepted Answer

Auditors will typically rely on internal controls over financial reporting if they determine that the controls are designed effectively and operating effectively. This reliance helps the auditor to reduce the amount of substantive testing that needs to be performed, thereby reducing audit time and costs. If control risk is assessed at a high level (choice A), it may indicate a lack of reliance on internal controls. If the client asks the auditor to test controls (choice C), it may indicate that the auditor is performing agreed-upon procedures rather than relying on controls. If the controls are sufficient to increase control risk to an acceptable level (choice D), it may indicate a lack of reliance on internal controls.

In Which of the Following Situations Will Auditors Typically Rely