In the financial statement audit of a nonpublic company, the auditor decides to perform tests of the controls related to the occurrence of sales transactions. Which of the following best explains why the auditor decided to test these controls? (1) In a nonissuer financial statement audit, the auditor is required to test the operating effectiveness of internal controls. (2) The auditor wants to obtain an understanding of the design of the internal controls. (3) Control risk is assessed at below the maximum. (4) The auditor wants to obtain an understanding of the implementation of the internal controls.

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Business

Solomon

14 August, 23:23

In the financial statement audit of a nonpublic company, the auditor decides to perform tests of the controls related to the occurrence of sales transactions. Which of the following best explains why the auditor decided to test these controls? (1) In a nonissuer financial statement audit, the auditor is required to test the operating effectiveness of internal controls. (2) The auditor wants to obtain an understanding of the design of the internal controls. (3) Control risk is assessed at below the maximum. (4) The auditor wants to obtain an understanding of the implementation of the internal controls.

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Hurst · Answer 1

3) Control risk is assessed at below the maximum.

Explanation:

When the control risks are assessed at below the maximum it means that the controls are effective regarding the prevention and detection of misstatements in the financial statements.

So if the auditor wants to test the controls, it means that he/she wants to verify the operating effectiveness of the controls.

In other words, apparently the controls show that there are no misstatements regarding the sales transactions, so the auditor wants to check how efficient the controls are.