Question

"If the auditors' assessment of the design of internal control reveals that it cannot be relied upon, the auditors are not required to prepare any documentation of internal control for their working papers"

Answer 1

False

Step-by-step explanation:

Internal controls refer to the control mechanism established by an entity for it's efficient operations and for timely detection of frauds. It is the responsibility of the auditor to assess their operational effectiveness.

The auditor is required to check two aspects. Firstly, whether the internal controls exist and secondly if they do, how effective and efficient those controls are.

The assessment of internal controls affects the nature, timing, and extent of procedures to be performed by the auditor.

If the auditor ascertains that managements internal controls are unreliable, he has to perform more procedures regarding the true and fair view of financial statements.

An auditor must maintain his working papers which serve as an evidence that he discharged his duties diligently and in an honest manner.

Working papers are the property of the auditor and he is not required to hand them over to the client.