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Becker Question CPA-02888

After performing risk assessment procedures, an auditor decided not to perform tests of controls. The auditor most likely decided that:

a. The available evidence obtained through tests of controls would not support an increased level of control risk.

b. A reduction in the assessed level of control risk is justified for certain financial statement assertions.

c. It would be inefficient to perform tests of controls that would result in a reduction in planned

substantive tests.

d. The assessed level of inherent risk exceeded the assessed level of control risk.

Explanation

Choice “c” is correct. After performing risk assessment procedures, an auditor might decide not to perform tests of controls because it would be inefficient. In other words, the time required to perform tests of controls would be greater than the reduction in time spent on substantive testing.

Choice “a” is incorrect. The auditor might decide not to perform tests of controls if the available audit evidence obtained through those tests would not support a decrease (not increase) in the level of control risk.

Choice “b” is incorrect. A reduction in the assessed level of control risk can only be justified based on tests of controls. If the auditor decides not to perform tests of controls, the assessed level of control risk may not be reduced.

Choice “d” is incorrect. The relationship of inherent risk to control risk does not determine the level of control testing to be performed.

WHAT I DONT UNDERSTAND IS THE WORDING AND EXACT MEANING OF CHOICE C, PLEASE HELP:

When I first read choice C, it didn’t make a whole lot of sense to me because it seems as though it would be MORE EFFICIENT for an auditor to perform tests of controls if he/she believes we can rely on them & thus there will be less substantive work to do, no? Because if an auditor finds it INEFFICIENT to test controls it is probably because the controls suck(are unreliable) or because the benefits outweigh the costs, thus as auditors we choose to INSTEAD do lots of substantive tests to gain our reasonable assurance. There’s probably something I’m not seeing here. Any help appreciated Thanks very much!

 

 

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[rknight21]

Because if an auditor finds it INEFFICIENT to test controls it is probably because the controls suck(are unreliable) or because the “COST outweigh the BENEFITS”, thus as auditors we choose to INSTEAD do lots of substantive tests to gain our reasonable assurance. There's probably something I'm not seeing here. Any help appreciated Thanks very much!

I am not sure what you are not clear on. you seem to have an understanding base on what you wrote above(except for that cost/benefit change i had to make)

with this auditing exam you aree most times looking for key words in your answer and answer C sums up the reason for not testing controls “it would be inefficient”

if risk is assessed and the auditor decides not to test controls its because his assessment has proven that controls are weak, so no sense in testing them. (thats just the rules)

if the assesment proven that controls are effective then you would want to test controls to see if this is truly the case…

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Thanks I think I understand and would pick out choice C for the “It would be inefficient to perform” piece of it, but the “result in a reduction of planned substantive tests” is confusing

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[rknight21]

thats going to be the way alot of answers are. the first part is gonna be clear and the second part is meant to be the distractor.. just remember key words key word key words

[Anonymous]

Crappy controls = Don't even bother testing the internal controls.

If the assessed level of IC is poor (i.e. High Control Risk), the main way to alleviate that risk is to increase substantive testing and NOT waste time testing the crappy controls (i.e. Decrease Detection Risk (DR)).

[rsr]

how crazy that 8 years later after this post I got tricked on the SAME EXACT part as NoscorestoDisplay which was “It would be inefficient to perform” piece of it, but the “result in a reduction of planned substantive tests” is confusing. IMO, I think its about reading the question the way its presented, in one part.

answer: It would be inefficient to perform tests of controls “THAT” would result in a reduction in planned substantive tests. [84%]. Hence, test of controls WOULD result in a reduction in sub tests IF the auditor decided to rely on them provided CR is assessed at low level.

Anyone care to correct or confirm if I am using a correct logic? I'm really diving into this because its one of my biggest problems..reading and misinterpreting the questions which usually always lead me to pick the wrong answer which is off by a “keyword”.

And so, how can I improve this weakness? is there a tactic or a methodical approach to this, like choosing the answer once you find that “keyword” and sort of ignoring the distractor part of the correct answer…

any advice is always very much appreciated.ty

[Author]

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