90.2K

Verified Solution

Link Copied!

13-28 (Objectives 13-4, 13-7) Following are evidencedecisions for the three audits described in Figure 13-3:

• Audit A Ineffective client internal controls

• Audit B Very effective client internal controls

• Audit C Somewhat effective client internal controls

Evidence Decisions

1. The auditor decided it was possible to assess control risk belowthe maximum.

2. The auditor identified effective controls and also identifiedsome deficiencies in controls.

3. The auditor performed extensive positive confirmations at thebalance sheet date.

4. The auditor performed tests of controls.

5. The auditor performed extensive tests of controls and minimalsubstantive tests.

6. The auditor performed substantive tests.

7. This audit was likely the least expensive to conduct.

8. The auditor confirmed receivables at an interim date.

Required

1. Explain why Audit B represents the maximum amount of reliancethat can be placed on internal control. Why can’t all the auditassurance be obtained by tests of controls?

2. Explain why the auditor may not place the maximum extent ofreliance on controls in Audit B and Audit C.

3. For each of the eight evidence decisions, indicate whether theevidence decision relates to each of the audits described above.Every evidence decision relates to at least one of the audits, andsome may relate to two or all three audits.