Failure to detect material dollar errors in the financial statements is a risk which the auditors primarily mitigate by:
A) Performing substantive procedures.
B) Performing tests of controls.
C) Assessing control risk.
D) Obtaining a client representation letter.

Question

Quizplus · Accepted Answer

Substantive procedures, such as analytical procedures and tests of details, are designed to detect material misstatements in the financial statements, including material dollar errors. By performing these procedures, auditors can mitigate the risk of failing to detect such errors. Tests of controls and assessing control risk are designed to assess the effectiveness of internal controls in preventing and detecting material misstatements, but may not be sufficient to detect material dollar errors in the financial statements. Obtaining a client representation letter is a standard audit procedure, but it alone does not mitigate the risk of failing to detect material dollar errors.

Failure to Detect Material Dollar Errors in the Financial Statements