Place an X in the box (for Situation 1 or Situation 2) which is most accurate for
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Question:
Place an X in the box (for Situation 1 or Situation 2) which is most accurate for each statement below; if you believe that the situations are the same relating to that question, place an X in each of the two boxes. In both situations assume inherent risk is at a moderate level.
Situation 1: While obtaining an understanding of internal control, you have determined that it appears to be very strong. You choose not to test controls in the area. | Situation 2: While obtaining an understanding of internal control, you have determined that it appears to be adequate-not strong, not weak. You choose to test controls in the area-they reveal that the system functions as expected. | ||
A. | The planned assessed level of control risk is lower for this situation | ||
B. | The planned allowable detection risk is lower for this situation. | ||
C. | More tests of controls will be performed for this situation. | ||
D. | More substantive procedures will be performed for this situation. | ||
E. | The assessed level of control risk will be lower for this situation. | ||
F. | The risk of misstatement will be lower in this situation. |
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