Question

Which of the following is false?

1) Regardless of the achieved level of control risk in connection with the audit of the financial statements, auditing standards require the auditor to perform some substantive procedures for all significant accounts and disclosures.
2) The absence of misstatements in financial statements is considered convincing evidence that existing controls are effective.
3) The audit of internal control is intended to draw conclusions about the effectiveness of internal control over financial reporting as of a specific date.
4) The auditor is required by AS5 to evaluate the implications of the financial statement audit for the effectiveness of internal control over financial reporting.

Answer 1

The false statement is that the absence of misstatements in financial statements is considered convincing evidence that existing controls are effective. This is not always true, as controls could be ineffective yet no errors have occurred due to other factors.

Step-by-step explanation:

The question asks which of the statements is false regarding audit standards and internal control evaluation. To determine the incorrect statement, let's analyze each statement in the context of the audit and internal control.

Statement 1 is true; auditing standards do require auditors to perform some substantive procedures for all significant accounts and disclosures, regardless of the level of control risk.

Statement 2 is false; the absence of misstatements in financial statements does not automatically imply that existing controls are effective. Controls could be ineffective but coincidentally no errors may have occurred, or errors could have been prevented or detected by other means.

Statement 3 is true; the audit of internal control is indeed meant to draw conclusions on the effectiveness of said control as of a specific date.

Statement 4 is true; Auditing Standard 5 (AS5) does require auditors to evaluate the implications of the financial statement audit for the control over financial reporting.

The false statement among those provided is the second one, related to the assumption that the absence of misstatements is convincing evidence that controls are effective.