Holding other planning considerations equal, a decrease in the amount of misstatements in a class of transactions that an auditor could tolerate most likely would cause the auditor to:
A.
Apply the planned substantive tests prior to the balance sheet date.
B.
Perform the planned auditing procedures closer to the balance sheet date.
C.
Increase the assessed level of control risk for relevant financial statement assertions.
D.
Decrease the extent of auditing procedures to be applied to the class of transactions.
Suggested Answer:B🗳️
Choice "B" is correct. A decrease in the amount of misstatements that the auditor can tolerate will cause the auditor to modify the nature, timing and/or extent of auditing procedures. Performing the planned procedures closer to the balance sheet date is a timing modification that addresses this change. Choice "A" is incorrect. The auditor would perform substantive procedures before year-end if the amount of misstatements the auditor could tolerate were increased. The earlier in the year that the auditor performs substantive testing, the greater the incremental risk the auditor accepts regarding the year-end financial statements. Choice "C" is incorrect. A change in the level of tolerable misstatement does not have a direct effect on the assessed level of control risk. Choice "D" is incorrect. A decrease in the amount of misstatements that can be tolerated would necessitate an increase in the extent of auditing procedures.
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