Which of the following statements is true?
A)Testing of controls is the most cost-efficient way of designing each audit.
B)Substantive testing is the most cost-efficient way of designing each audit.
C)As the work of testing of controls increases,the cost of substantive work increases.
D)There is a point where further testing of controls becomes more expensive than performing substantive tests.

Question

Quizplus · Accepted Answer

There is a point in auditing where further testing of controls becomes more expensive than performing substantive tests. This is known as the point of diminishing returns. It is important for auditors to determine this point and strike a balance between the two types of testing in order to have an efficient and effective audit. Therefore, option D is the correct statement. Option A is incorrect because testing of controls does not necessarily result in cost-efficiency. Option B is also incorrect because substantive testing can be more expensive in some cases. Option C may be true in some situations, but it is not a general rule.

Which of the Following Statements Is True