In: Accounting
1) Why does the audit firm perform tests of controls after making its preliminary assessment of control risk? Discuss. (2) Could the audit firm decide not to perform tests of controls (or to reduce them to a very low level)? When and Why? Discuss. (3) Could the audit firm use analytical procedures as a method of testing of controls? Why or why not? Discuss.
The auditor shall perform test of control becaues:
The auditor may decide not to perform test of controls if:
As this will lead additional work and wasteage of time
The auditor can perform analytical procedure as test of control depending upon the following
If the analytical procedure is suitable for the given assertion , the data on which procedure is performed is reliable or the data is not materially misstated the analytical procedure can be performed as the test of control however if the analytical procedure is not suitable for the given assertion , the data on which procedure is performed is not reliable or the data is materially misstated the analytical procedure cannot be performed as the test of control.