After obtaining an understanding of internal control and performing risk assessment procedures, an auditor decided not to perform tests of controls. The auditor most likely concluded that the:
A.
Additional evidence to support a reduction in control risk was not cost-beneficial to obtain.
B.
Assessed level of inherent risk exceeded the assessed level of control risk.
C.
Internal control was properly designed and justifiably may be relied on.
D.
Evidence obtainable through tests of controls would not support an increased level of control risk.
Suggested Answer:A🗳️
Choice "A" is correct. When an auditor decides not to perform tests of controls, the auditor most likely concluded that the additional evidence to support a reduction in control risk was not cost-beneficial to obtain. In other words, the additional costs that would be incurred to support a lower assessed level of control risk would not be offset by the anticipated cost savings resulting from a lower level of substantive tests. Choice "B" is incorrect. The assessed level of inherent risk (which is the susceptibility of an assertion to a material misstatement based upon the nature of the account balance or transaction class) exists independently from and bears no direct relationship to control risk. Choice "C" is incorrect. Even if internal control is properly designed, it cannot justifiably be relied upon unless tests of controls are performed. Choice "D" is incorrect. When performing additional tests of controls, an auditor is attempting to support a lower level of control risk, not higher.
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