Auditors are required to obtain a sufficient understanding of an entity’s internal control. This understanding is required by the performance principle of GAAS.
Required:
A. What are some of the reasons (purposes) for evaluating an entity’s internal control?
B. What is the impact on substantive testing procedures if the auditor assesses control risk at the “maximum” level? What is the impact on substantive testing procedures if the auditor assesses control risk below the “maximum” level?
C. Should auditors always try to obtain enough evidence to assess control risk below the “maximum” level? Explain.
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