Final answer:
For each significant internal control deficiency, it is not required for an auditor to design tests of controls to assess the deficiency and its effect on the financial statements; auditors communicate deficiencies and focus on understanding controls sufficient for audit planning.
So option (B) is correct.
Step-by-step explanation:
The statement that for each significant internal control deficiency identified by the auditor, he or she should design one or more tests of controls to assess the extent of the deficiency and its effect on the financial statements is False. When an auditor identifies a significant deficiency in internal control, their primary responsibility is to communicate this to those charged with governance, typically the audit committee or the board of directors. The auditor must understand internal control sufficiently to plan the audit, which involves evaluating the design of the control and determining whether it has been implemented but not necessarily testing the operating effectiveness of the control unless it is part of the designed audit approach to rely on the control to detect or prevent material misstatements. Testing the operating effectiveness of controls is typically performed when the auditor plans to rely on the controls to reduce substantive testing or when there is a suspicion that the controls are not operating effectively.