[SchruteBeet]

This is a Becker question. Holding other planning considerations equal, a decrease in the amount of misstatements in a class of transactions that an auditor could tolerate most likely would cause the auditor to:
A. Perform planned auditing procedures closer to balance sheet date
B. Increase the assessed level of control risk for financial statement assertions
C. Decrease the extent of auditing procedures to be applied to the class of transactions
D. Apply the planned substantive tests prior to the balance sheet date

Why is A the correct answer?

[fragchild]

In these types of question where the answer isn't so obvious, it is better to try eliminate incorrect responses.

Answer B, there's no mention of how well the internal controls are working in the company. Plus I think control risk is independent to the lowering of tolerable misstatements
Answer C, this is the exact opposite of we would do. Because we are tolerating less misstatements, we need to increase the extent of audit procedures
Answer D, if we perform tests before the balance sheet date then we won't be getting a complete sample of the transactions for the year (note: this is a simplistic answer, substantive procedures can occur prior to year-end with roll-forward procedures being performed for remaining period)

Answer A seems the most logical, as the you generally want testing to be done at year-end (i.e. balance-sheet date)

[SchruteBeet]

fragchild That helps a lot, thanks so much! I was reading into the question too much and I realized I misunderstood the question. The way I interpreted the question was that the auditor can now accept more tolerable misstatements. I read your explanation and it all made sense!

[Author]

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