Question

Test of controls must be performed if control risk is set at a maximum level.

a)True
b)False

Answer 1

Test of controls must not be performed if control risk is set at a maximum level.

Step-by-step explanation:

The statement is false. When control risk is set at a maximum level, it means that the auditor believes there is a high risk of material misstatement in the financial statements. In this case, substantive tests are performed instead of test of controls. Substantive tests focus on detecting material misstatements directly through procedures like examination, confirmation, and recalculations.