Answered: Which statement is false

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Which statement is false?

a. If control risk is assessed as low, the auditor cannot plan on relying on the controls to increase substantive procedures for account balances.

b. The auditor will not perform tests of controls; instead, the auditor must plan for substantive procedures, without relying on the client's internal controls.

c. Based on obtaining an understanding through risk assessment procedures, the auditor assesses control risk ranging from high (weak controls) to low (strong controls).

d. Assessing control risk as high means the auditor does not have confidence that internal controls will prevent or detect material misstatements; assessing control risk as low has the opposite implication.

Expert Solution

Step 1

Meaning of Internal control

The process designed, implemented and maintained by those charge with governance, management and other personal to provide reasonable assurance with regard to

reliability of financial reporting,
effectiveness and efficiency of operations,
safeguarding of assets
Compliance with applicable law and regulations

If control risk is low reliability is more is control risk is high reliability is low

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