Question

Which of the following represents the correct sequence of audit steps that come after first obtaining an understanding and documenting the entity's internal control?

A)Test of Controls, Assess Control Risk, Determine Extent of Substantive Tests, Reassess Control Risk.
B)Assess Control Risk, Test of Controls, Determine Extent of Substantive Testing, Reassess Control Risk.
C)Assess Control Risk, Determine Extent of Substantive Testing, Test of Controls, Reassess Control Risk.
D)Assess Control Risk, Test of Controls, Reassess Control Risk, Determine Extent of Substantive Testing.

Answer 1

The correct sequence of audit steps that come after first obtaining an understanding and documenting the entity's internal control is: Assess Control Risk, Test of Controls, Reassess Control Risk, Determine Extent of Substantive Testing.

Step-by-step explanation:

The correct sequence of audit steps that come after first obtaining an understanding and documenting the entity's internal control is option D) Assess Control Risk, Test of Controls, Reassess Control Risk, Determine Extent of Substantive Testing.

After obtaining an understanding and documenting the entity's internal control, the auditor assesses the control risk to determine the reliance that can be placed on the internal controls. Then, the auditor performs the test of controls to assess the operating effectiveness of the controls. Based on the results, the auditor may reassess the control risk. Finally, the auditor determines the extent of substantive testing required to gather sufficient evidence about the accuracy and completeness of the financial statements.