Final answer:
An auditor may reduce tests of details for specific audit objectives when analytical procedures or assessments of internal controls suggest a low risk of material misstatement, or based on professional judgment informed by preliminary findings. Resource constraints can also influence the extent of detailed testing required.
Step-by-step explanation:
An auditor may decide to reduce tests of details for a particular audit objective if other tests have already provided sufficient assurance regarding the accuracy of the financial statements.
For example, if an auditor has performed significant analytical procedures that indicate the likelihood of material misstatement is low, they might reduce the extent of detailed testing.
Likewise, if an auditor has assessed internal controls as being strong, leading to a lower assessed risk of material misstatement, the need for detailed substantive testing may be lessened.
Moreover, auditors use their professional judgment to determine the appropriate level of testing needed to form an opinion. In some cases, auditors may have a preliminary sense of the accuracy of the financial statements, which can guide the decision to perform fewer tests.
Additionally, when resources are constrained, as in the decreased audit activity by the federal government regarding tax audits, the approach to testing may be adjusted to focus on areas with higher perceived risk of misstatement.