An auditor increases substantive testing after assessing a high risk of material misstatement. This is mainly an example of:
Correct answer: B. Reducing audit risk through a responsive procedure
- A. Preparing the financial statements for management
- B. Reducing audit risk through a responsive procedure
- C. Testing the auditor’s independence
- D. Replacing the entity’s control environment
Explanation
The auditor responds to higher assessed risk by designing more effective or extensive substantive procedures. This response is intended to reduce the risk that a material misstatement remains undetected.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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