Question

AAB and Company is auditing a large publicly traded company. The

audit of internal controls over financial reporting has been
properly planned and the auditors have already identified controls
to test Question:
Which of the following procedures should the auditors perform next?
a. Obtain an understanding of the internal control environment.
b. Assess the risks of material misstatement.
c. Design and perform tests of controls.
d. Evaluate the design effectiveness of controls.

Answer 1

The auditors should evaluate the design effectiveness of controls to ensure they are appropriate and effective in mitigating risks of material misstatement.

Step-by-step explanation:

The auditors should perform the next procedure, which is d. Evaluate the design effectiveness of controls. This involves assessing whether the identified controls are designed appropriately to mitigate the risks of material misstatement in the financial reporting. By evaluating the design effectiveness of controls, the auditors can determine whether they need to perform further tests of controls to ensure their effectiveness in preventing or detecting errors or fraud.