Question

During the audit of Glazier LLC, a distributor of glass products throughout the continental United States, it has been determined by the auditor, Locktight CPAs, that the client's system of internal control is not as robust as had been initially thought. As a result of this finding, which of the following strategies is most likely? The auditor will assess risk of material misstatement as high and adopt a reliance approach, whereby the auditor will perform increased substantive testing, including tests of details. The auditor will advise the internal control function to begin remedying defective internal controls, and will return to the audit once these controls have been corrected. The auditor will assess the client's controls as defective, increase the risk of material misstatement and substantive tests, and decrease audit risk. The auditor is likely to assess the risk of material misstatement as high, and rely less on the client's controls. As a result, the auditor will increase substantive testing to compensate for this.

Answer 1

The auditor will assess the risk of material misstatement as high and adopt a reliance approach, increasing substantive testing to compensate.

Step-by-step explanation:

The most likely strategy in this scenario is for the auditor to assess the risk of material misstatement as high and adopt a reliance approach by performing increased substantive testing, including tests of details.

By assessing the client's system of internal control as not robust, the auditor will rely less on the client's controls and increase their own testing to compensate for the higher risk of material misstatement.

This approach ensures that the auditor obtains sufficient evidence to form an opinion on the financial statements and reduces the potential for undetected errors or fraud.