[iheartcpa]

I was reading the note and I don’t understand the following statement:

“When control risk is assessed to be at maximum, no internal control testing is performed;

When control risk is below maximum, test internal control and evaluate control risk based on tests.”

My question is, if control risk is at maximum, is that means there is a high risk that the internal control will not detect fraud/error? And why no internal control testing will be necessary?

Could someone clarify that? Thanks in advance!

REG PASS
BEC PASS
FAR FAIL PASS
AUD FAIL FAIL RETAKE IN FEB

[Anonymous]

You're right….in this scenario, control risk is at the very highest it can be – extremely unreliable. In this case, you're just wasting time testing controls, because you can't rely on them anyways.

If the control risk is below maximum, it is implied that you can at least rely on the controls to a certain extent – tests of controls will tell you how reliable internal control actually is in relation to financial reporting.

[Anonymous]

You're right….in this scenario, control risk is at the very highest it can be – extremely unreliable. In this case, you're just wasting time testing controls, because you can't rely on them anyways.

If the control risk is below maximum, it is implied that you can at least rely on the controls to a certain extent – tests of controls will tell you how reliable internal control actually is in relation to financial reporting.

[PJJW90810]

As 8280 mentioned when control risk is at a maximum it is pointless to test internal control because you cannot rely on them to detect an error.

FAR: 77 (08/07/13)
AUD: 78 (08/29/13)
REG: 76 (11/07/13)
BEC: 79 (12/06/13)
Ethics: 98%

Application sent 12/31/13

Used Becker Self-Study

[PJJW90810]

As 8280 mentioned when control risk is at a maximum it is pointless to test internal control because you cannot rely on them to detect an error.

FAR: 77 (08/07/13)
AUD: 78 (08/29/13)
REG: 76 (11/07/13)
BEC: 79 (12/06/13)
Ethics: 98%

Application sent 12/31/13

Used Becker Self-Study

[Author]

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