CAF-8 · Chapter 7 · Question 9 of 10
If an auditor has assessed control risk in the payroll system as extremely low and tests of controls confirm they operate effectively, how does this impact substantive analytical procedures?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The auditor can place greater reliance on substantive analytical procedures, potentially reducing extensive detailed testing of transactions.
Explanation
When internal controls over a system are strong, the data produced by that system is highly reliable. Consequently, the auditor can confidently use substantive analytical procedures to gain assurance, reducing the need for heavy, line-by-line substantive testing.
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