Question

the Audit Planning Process Internal control:

1. How does an Auditor use the Information form the Risk Assessment Procedures?

Answer 1

The auditor’s risk assessment procedures identified several risks that the auditor deems to be significant risks. Several internal controls exist that are designed to mitigate the risks identified.When the auditor’s risk assessment procedures identify significant risks, the auditor is required to test the operating effectiveness of controls that mitigate these risks in the current year audit, if the auditor plans to rely on those controls to support a control risk assessment below 100%. Thus, tests of controls are required in the current year audit for those controls the auditor plans to rely on to reduce control risk. The greater the risk, the more audit evidence the auditor should obtain that controls are operating effectively.

The auditor uses the control risk assessments and the results of tests of controls to determine the appropriate level of detection risk and the nature and extent of substantive tests for the audit engagement. The auditor links the control risk assessments at the transaction level to the balance-related audit objectives for the accounts affected by the transaction cycles, and also to the presentation and disclosure audit objectives.