Discuss AICPA CPA-Auditing Exam Topic 2 Question 125

Before applying substantive tests to the details of asset accounts at an interim date, an auditor should assess:

AControl risk at a low level.

BInherent risk at a high level.

CThe difficulty in controlling the incremental audit risk.

DMateriality for the accounts tested as insignificant.
Explanation
Choice 'c' is correct. Before performing substantive tests at an interim date, the auditor must assess the difficulty in controlling the incremental audit risk from the interim date (on which the substantive procedures are performed) to the year-end date (on which an opinion is rendered).
Choice 'a' is incorrect. The auditor would not have to assess control risk at a low level in order to perform substantive tests at interim. It may simply be more efficient to perform a substantive audit. As long as the balances tested at interim are reasonably predictable with respect to amount, relative significance and composition, the account may be tested at interim.
Choice 'b' is incorrect. Generally, inherent risk should be low in order to test substantively at interim.
Choice 'd' is incorrect. If the materiality level for those accounts to be tested is insignificant, then the auditor probably would not perform any substantive testing, since it is unlikely that a material error exists in an insignificant balance.

Suggested Answer: C

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24 comments · newest first

Peggy 2 days ago

Choice B is also misleading. Inherent risk should be low, not high.

Bettina 7 days ago

Right! Choice A seems off to me.

Francene 12 days ago

Exactly! It's more about the risk from interim to year-end.

Peggy 17 days ago

I feel like assessing control risk isn't really necessary for interim tests.

Bettina 23 days ago

Yeah, controlling incremental audit risk is crucial.

Francene 28 days ago

I think choice C makes the most sense.

Domonique 1 month ago

I feel confident about this question now.

Eleni 1 month ago

For sure! It aligns with the audit process.

Remona 1 month ago

So, C is definitely the best choice.

Domonique 2 months ago

Agreed. Materiality being insignificant? That's a no-go for testing.

Eleni 2 months ago

Right, and inherent risk being high is just wrong for interim tests.

Remona 2 months ago

Exactly! Control risk isn't the main focus here.

Domonique 2 months ago

I feel like they really want us to focus on that risk assessment.

Eleni 2 months ago

Yeah, choice C makes sense. Incremental audit risk is key.

Remona 2 months ago

I think it's all about assessing the risk properly.

Sarah 3 months ago

Yup, C is definitely the right call!

Page 3 months ago

Materiality for insignificant accounts means no testing needed.

Carman 3 months ago

Really? I’m surprised that control risk isn’t a factor here.

Richelle 3 months ago

I thought inherent risk should be high for interim tests?

Telma 3 months ago

Choice C makes total sense!

Sang 4 months ago

I definitely remember that if materiality is insignificant, we wouldn't perform substantive tests. That part makes sense to me!

Cheryl 5 months ago

I thought inherent risk should be high for substantive tests at interim, but now I'm confused because the explanation says it should be low.

Thaddeus 5 months ago

I think we practiced a question similar to this where we had to identify risks before interim tests. I remember "c" being the right choice, but I can't recall why exactly.

Celestina 5 months ago

I remember we discussed how assessing control risk isn't necessary for interim testing, but I still feel a bit unsure about the specifics.

AICPA CPA-Auditing Exam - Topic 2 Question 125 Discussion