Auditing 100 Practice Exam

Regarding documentation when control risk is assessed at the maximum, which statement is true?

If the auditor assesses the level of control risk at the maximum, no documentation of the reason is necessary. If the auditor assesses the level control risk at less than maximum, documentation is unnecessary. If the auditor assesses the level of control risk at the maximum, documentation of the reason is necessary. All of the given choices.

Correct Answer:

If the auditor assesses the level of control risk at the maximum, no documentation of the reason is necessary.

Explanation:

Understanding how control risk affects audit documentation helps here. When control risk is set at the maximum, it means the auditor cannot rely on the entity’s internal controls and will proceed with substantive procedures throughout the audit. In this framing, the decision to not rely on controls is a straightforward conclusion, so no separate documentation of the reason for that assessment is considered necessary within the given context. That’s why the statement asserting no documentation is the best choice. The other options imply that documentation is required in situations where the assessment is either less than maximum or maximum, which doesn’t align with the scenario described.

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