Question

Which of the following is an accurate statement regarding the risk assessment process of phase I of the audit process for the sales and collection cycle?

1) Auditors must perform substantive tests related to assertions deemed to have significant risks.
2) The auditor must relate control risk for transaction-related audit objectives to balance-related audit objectives in deciding planned inherent risk.
3) The realizable value balance-related audit objectives are affected by assessed control risk for classes of transactions.
4) All of the above are accurate statements.

Answer 1

An accurate statement regarding the risk assessment process of phase I of the audit process for the sales and collection cycle is that auditors must perform substantive tests related to assertions deemed to have significant risks.

Step-by-step explanation:

An accurate statement regarding the risk assessment process of phase I of the audit process for the sales and collection cycle is: 1) Auditors must perform substantive tests related to assertions deemed to have significant risks.

For example: Auditors may perform substantive tests on the sales transactions to verify the existence, completeness, and accuracy of recorded sales.

Options 2 and 3 are not accurate statements in relation to the risk assessment process of phase I of the audit process.