Question

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing tests of ending account balances.

A) True
B) False

Answer 1

It is false that audits are most efficient when focused only on testing classes of transactions and account balances. An effective audit also encompasses understanding the entity, risk assessment, and tests of controls alongside substantive and analytical procedures.

Step-by-step explanation:

It is false that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing tests of ending account balances. While these areas are important, an effective audit approach typically includes an understanding of the entity and its environment, assessment of the risks of material misstatement, and a response to identified risks with a combination of tests of controls, substantive procedures, and analytical procedures. Focusing solely on classes of transactions and tests of account balances might overlook potential issues like fraud or operational inefficiencies that could affect the financial statements.