Question

Auditors may decide to perform some tests of controls or not perform any tests of controls, if inherent risk is assessed as ________. moderate or low high or moderate unusually high None of these options are correct.

Answer 1

Answer: Moderate or low

Explanation:

Tests of Control are one by auditors to determine the effectiveness of the internal controls in the company in being able to detect accounting errors and anomalies.

If a company seems to have a moderate or low inherent risk the Auditors may or may not initiate Tests of Control due to this reduced risk.

If the company however, has either high or moderate or unusually high risk, the Auditors have to perform Tests of Control to determine where the company is going wrong.