Question

The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process. To minimize this risk, the auditor relies primarily on

(1) substantive tests.
(2) tests of controls.
(3) internal control.
(4) statistical analysis.

Answer 1

To minimize the risk of not detecting material misstatements, auditors primarily rely on tests of controls and substantive tests.

Step-by-step explanation:

To minimize the risk of not detecting material misstatements in the accounting process, auditors primarily rely on tests of controls and substantive tests.

Tests of controls are procedures performed to assess the effectiveness of the internal controls implemented by an organization. These tests help auditors gain assurance that the internal controls are operating effectively, reducing the risk of material misstatements.

Substantive tests, on the other hand, are procedures performed to obtain evidence about the accuracy and completeness of the financial information. These tests involve examining transactions, account balances, and supporting documentation to detect any material misstatements.