Final answer:
After auditors have completed testing controls and assessing control risk, they make decisions about the nature, timing, and extent of substantive testing. This assessment is fundamental to developing the audit strategy, particularly defining how intensely financial statement assertions need to be tested. While a high control risk requires more robust substantive testing, it is generally not a reason for auditors to withdraw from the engagement.
Step-by-step explanation:
After auditors have completed testing controls and drawn a conclusion about control risk, they make decisions about the nature, timing, and extent of substantive testing. This step is crucial because the assessment of control risk influences the auditor’s approach to substantive testing, which is the audit work done to test the financial statement assertions. If controls are deemed effective, the auditor may decide to perform less extensive substantive testing. However, if control risk is considered high, they might increase the extent of substantive testing to gain enough assurance that the financial statements are free of material misstatement.
The statement that auditors are ready to issue the audit opinion after completing control risk assessment is premature. An audit opinion is only issued after all phases of the audit have been completed, which includes the completion of substantive procedures and final review of the audit evidence gathered.
Moreover, the suggestion to withdraw from the engagement if control risk is assessed as high is not typically correct. While high control risk increases the complexity and extent of audit work required, it does not necessarily mean an auditor should withdraw from the engagement. Instead, the auditor must adjust their plan to adequately address the higher risk.