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For a Through F Place an X in the Box

Question 95

Short Answer

For A through F place an X in the box (for Situation 1 or Situation 2)which is most accurate for each statement below;if for any question you believe that the situations are the same relating to that question place an X in each of the two boxes.
In both situations assume inherent risk is at a high level.
Situation 1: While obtaining an understanding of internal control,you have determined that it appears to be very strong. You choose not to test controls in the area.
Situation 2: While obtaining an understanding of internal control,you have determined that it appears to be adequate-not strong,not weak. You choose to test controls in the area-they reveal that the system functions as expected.
 Situation 1 Situation 2 A  The planned assessed level of control risk is  lower for this situation.  B.  The planned allowable detection risk is lower for  this situation.  C.  More tests of controls will be performed for this  situation.  D.  More substantive procedures will be performed  for this situation.  E.  The assessed level of control risk will be lower  for this situation.  F.  The risk of misstatement will be lower in this  situation. \begin{array}{|l|l|l|l|}\hline &&\text { Situation } 1 &\text { Situation } 2\\\hline \text { A } & \begin{array}{l}\text { The planned assessed level of control risk is } \\\text { lower for this situation. }\end{array} \\\hline \text { B. } & \begin{array}{l}\text { The planned allowable detection risk is lower for } \\\text { this situation. }\end{array} \\\hline \text { C. } & \begin{array}{l}\text { More tests of controls will be performed for this } \\\text { situation. }\end{array} \\\hline \text { D. } & \begin{array}{l}\text { More substantive procedures will be performed } \\\text { for this situation. }\end{array} \\\hline \text { E. } & \begin{array}{l}\text { The assessed level of control risk will be lower } \\\text { for this situation. }\end{array} \\\hline \text { F. } & \begin{array}{l}\text { The risk of misstatement will be lower in this } \\\text { situation. }\\\end{array}\\\hline\end{array}

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