Exam AUD topic 1 question 515 discussion

Actual exam question from AICPA's AUD

Question #: 515
Topic #: 1

In an environment that is highly automated, an auditor determines that it is not possible to reduce detection risk solely by substantive tests of transactions. Under these circumstances, the auditor most likely would:

A. Perform tests of controls to support a lower level of assessed control risk.
B. Increase the sample size to reduce sampling risk and detection risk.
C. Adjust the materiality level and consider the effect on inherent risk.
D. Apply analytical procedures and consider the effect on control risk.

Show Suggested Answer

Suggested Answer: A 🗳️
Choice "A" is correct. When an entity transmits, processes, maintains, or accesses significant information electronically, factors unique to electronic processing may make it impractical or impossible to reduce detection risk to an acceptable level through substantive testing alone. In such cases, tests of controls should be performed.
Choices "B", "C", and "D" are incorrect. Certain factors unique to electronic processing may make it impractical or impossible to reduce detection risk to an acceptable level through substantive testing alone. In such cases, tests of controls should be performed to address the increased potential for unauthorized access, the risks of insufficient paper-based audit evidence, and the fact that the appropriateness and sufficiency of evidence may be dependent to some extent on computerized controls. Simply expanding the sample size, adjusting materiality levels, or applying analytical procedures will not address these concerns.

by gemazyni at April 5, 2025, 4:45 p.m.

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