Understanding components of internal control and assessing the level of control risk are primarily used by the auditor to:
A) determine whether procedures and records concerning the safeguarding of assets are reliable.
B) modify the initial assessments of inherent risk and preliminary judgements about materiality levels.
C) determine the nature, timing, and extent of substantive tests for financial statement assertions.
D) ascertain whether the opportunities to allow any person to both perpetrate and conceal irregularities are minimised.

Question

Quizplus · Accepted Answer

Understanding components of internal control and assessing the level of control risk helps the auditor to determine the nature, timing, and extent of substantive tests for financial statement assertions. This is because the auditor can rely on the effectiveness of internal controls to reduce the risk of misstatement, which in turn affects the extent of substantive testing required.

Understanding Components of Internal Control and Assessing the Level of Control