Question

When there is a significant risk that an account will be misstated and the client's system of internal controls is not considered effective at reducing that risk:

		more high quality evidence is gathered when conducting substantive tests.
		detection risk is set as low.
		detection risk is set as high.
		none of the above.

Which of these would be a reason for adopting a predominantly substantive approach?

		Accounts are affected by more than one transaction class.
		Detection risk has been assessed as high.
		There are no significant control procedures that pertain to the assertion.
		Control risk has been assessed as low.

After the auditor planned the audit based on the lower assessed level of control risk approach, it was found that the tests of control did not support this approach. Although the controls were well designed, they were not implemented and therefore ineffective. What audit strategy should the auditor now pursue?

		Adopt a predominantly substantive approach.
		Perform more extensive tests of control than originally planned.
		Reduce the level of substantive procedures.
		None of the above.

Answer 1

When there is a significant risk that an account will be misstated and the client's system of internal controls is not considered effective at reducing that risk:

detection risk is set as low.

Which of these would be a reason for adopting a predominantly substantive approach?

There are no significant control procedures that pertain to the assertion.

After the auditor planned the audit based on the lower assessed level of control risk approach, it was found that the tests of control did not support this approach. Although the controls were well designed, they were not implemented and therefore ineffective. What audit strategy should the auditor now pursue?

Perform more extensive tests of control than originally planned.