Exam AUD topic 1 question 523 discussion

Actual exam question from AICPA's AUD

Question #: 523
Topic #: 1

After performing risk assessment procedures, an auditor decided not to perform tests of controls. The auditor most likely decided that:

A. The available evidence obtained through tests of controls would not support an increased level of control risk.
B. A reduction in the assessed level of control risk is justified for certain financial statement assertions.
C. It would be inefficient to perform tests of controls that would result in a reduction in planned substantive tests.
D. The assessed level of inherent risk exceeded the assessed level of control risk.

Show Suggested Answer

Suggested Answer: C 🗳️
Choice "C" is correct. After performing risk assessment procedures, an auditor might decide not to perform tests of controls because it would be inefficient. In other words, the time required to perform tests of controls would be greater than the reduction in time spent on substantive testing.
Choice "A" is incorrect. The auditor might decide not to perform tests of controls if the available audit evidence obtained through those tests would not support a decrease (not increase) in the level of control risk.
Choice "B" is incorrect. A reduction in the assessed level of control risk can only be justified based on tests of controls. If the auditor decides not to perform tests of controls, the assessed level of control risk may not be reduced.
Choice "D" is incorrect. The relationship of inherent risk to control risk does not determine the level of control testing to be performed.

by gemazyni at April 5, 2025, 4:46 p.m.

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