Final answer:
If testing controls around an estimate doesn't yield enough evidence, auditors conduct substantive procedures on estimate reasonableness to gather sufficient audit evidence, similar to researchers using experimental studies to gather data.
Step-by-step explanation:
If testing the operating effectiveness of controls surrounding an estimate alone does not provide sufficient appropriate audit evidence, auditors also conduct substantive procedures on the reasonableness of accounting estimates. This includes verifying the inputs, assumptions, and calculations used in making the estimates to ensure they are reasonable and supportable.
Audit evidence is found not only through the efficacy of control systems but also by examining the underlying financial transactions and events. Through substantive procedures, auditors aim to gather the necessary evidence to form a conclusion about the financial statements.
In the context of hypothesis testing based on sample evidence, such procedures allow an auditor to determine whether an estimate made by the company is reasonable or should be adjusted. Similar to researchers in experimental studies who gather enough data to compare groups for cause-and-effect relationships, auditors must gather sufficient and appropriate audit evidence to support the accuracy of the financial statements.
Therefore, item 3, "auditors also conduct substantive procedures on the reasonableness of accounting estimates," is the correct completion of the statement.