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Chapter 7 3 4

Effect of controls on the audit

The auditor will test the controls to assess whether they are effective at preventing,
detecting and correcting misstatements.

This enables them to assess control risk.

If control risk is low:

 The auditor can place more reliance on internal controls and evidence
generated internally within the entity.

 The quantity of detailed substantive procedures performed at the final audit
stage can decrease.

 The audit strategy and plan will be updated to reflect that fewer substantive
procedures may be required or smaller sample sizes can be tested at the final
audit stage.

If control risk is high:

 Increase the volume of procedures conducted at and after the year-end

 Increase the level of substantive procedures, in particular, tests of detail

 Increase the locations included in the audit scope

 Place less reliance on analytical procedures

 Place less reliance on written representations from management

 Obtain more evidence from external sources

 Update the audit strategy and plan to reflect the additional testing required at
the final audit stage.

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