Auditors typically rely on internal controls of their private company clients:
A)only as needed to complete the audit and satisfy Sarbanes-Oxley requirements.
B)only if the controls are determined to be effective.
C)only if the client asks an auditor to test controls.
D)only if the controls are sufficient to increase Control Risk to an acceptable level.

Question

Quizplus · Accepted Answer

Auditors are required to obtain an understanding of the internal control system and rely on its effectiveness to plan and perform the audit. Therefore, auditors would only rely on the internal controls if they are determined to be effective. Option A is incorrect because Sarbanes-Oxley requirements only apply to public companies, not private companies. Option C is also incorrect because the auditors have a responsibility to evaluate internal controls themselves, instead of relying solely on the client's request. Option D is incorrect because the objective of the internal control system is to reduce Control Risk to an acceptable level, not increase it.

Auditors Typically Rely on Internal Controls of Their Private Company