Current Attempt in Progress

Michael and Sonya, two audit managers are discussing year$-$end versus interim procedures with a new audit staff associate, Kai. Kai is trying to understand why some accounts are tested in interim periods and others at year end. Michael and Sonya's best response to this question would be which of the following?

Accounts and assertions that are assessed by the auditor as likely to contain an increased risk of material misstatement are usually audited during interim periods.

Accounts and assertions that the auditor assesses as likely to represent decreased audit risk are usually audited at year end, to allow time during the audit to focus on higher risk areas.

Generally accepted auditing standards require the auditor to meet with senior management at the beginning of the audit and discuss when each account will be tested, and the nature and extent of testing for each.

Auditors may choose to audit accounts and assertions potentially containing a higher risk of material misstatement closer to year end, as account balances typically reflect year end totals.