Final answer:
When responding to assessed risks, an auditor must prioritize the nature of the audit procedure over the opinions of management or internal auditors. Their own judgment is crucial in assessing whether the audit procedure sufficiently addresses the identified risks. The correct option is 1)
Step-by-step explanation:
The most important factor when responding to assessed risks is consideration of the nature of the audit procedure. This involves understanding how the audit procedure is meant to address the specific risk and whether it is adequate. Auditors assess risk as part of their responsibility to form an opinion on the financial statements. They must rely on their professional judgment rather than the opinions of management or internal auditors. The audit procedure should be designed to detect any misstatements that could impact the financial reports and ensure that the organization’s internal controls are effective in managing risks.
Think about reviewing as a form of reporting with the addition of your carefully considered opinion. Here, the reviewer (or auditor) must evaluate the evidence gathered during the audit and form a professional conclusion about the risk levels associated with financial reporting and internal controls, as opposed to relying on subjective opinions.