If inherent risk is high and no assurance has been obtained from controls testing:
A)extensive substantive procedures need to be performed to estimate the dollar value of any error in the account balance.
B)only overall analytical review procedures need to be performed to reduce detection risk to an acceptable level.
C)no further substantive testing needs to be performed.
D)None of the above.

Question

Quizplus · Accepted Answer

When inherent risk is high and no assurance has been obtained from controls testing, extensive substantive procedures need to be performed to estimate the dollar value of any error in the account balance. This is because high inherent risk means that there is a greater likelihood of material misstatements in the financial statements. Without assurance from controls testing, it is not possible to reduce detection risk to an acceptable level without performing extensive substantive procedures. Therefore, choice A is the best option.

If Inherent Risk Is High and No Assurance Has Been