Question

Choose the answer which best describes the relationship between the attribute given for a financial statement account and the likely reliance on substantive analytical procedures for that account within an audit: Adequacy of Internal Controls Risk of Material Misstatement Predictability of Relationships Among Data a. Direct Inverse Direct b. Inverse Inverse Direct c. Inverse Direct Inverse d. Direct Direct Inverse quizet

Answer 1

Answer:

The correct answer is A

Explanation:

There is a direct relationship among the adequacy of the internal control as well as the ability of the auditor to rely on the procedures of the substantive analytical. When the entity does not have the efficient internal controls, then the auditor will rely on the procedures.

There is an inverse relationship among the RMM ( stated as risk of the material misstatement) as well as the ability of the auditor to rely on the procedures. And high RMM states that the internal control cannot be relied on to detect the material misstatement on the financial statements, which cause the auditor to rely on the tests of controls.

And there is a direct relationship among the predictability of the relationships among the data and the ability of the auditor to rely on the procedures. When the relationships are predictable, then the auditor could create a meaningful expectations which cause the procedures to be more efficient in detection of material misstatement.