ACCA Strategic Professional · Advanced Audit and Assurance (International) · Planning, materiality and assessing the risk of material misstatement

Tarnby Co, a client of Hollis & Partners, has a sophisticated automated purchasing system. The auditor has identified a significant risk over the completeness of accruals and intends to rely on the operating effectiveness of controls over it. Which statement is correct under ISA 315 (Revised 2019) and ISA 330?

The auditor must evaluate the design and implementation of controls addressing the significant risk, and test operating effectiveness where reliance is planned or where substantive procedures alone cannot give sufficient appropriate evidence. Testing controls does not remove the need for substantive procedures on significant risks.

1. AThe auditor must evaluate the design and implementation of the relevant controls, and must test their operating effectiveness if planning to rely on them or if substantive procedures alone cannot provide sufficient appropriate evidenceCorrect
2. BEvaluating design and implementation is unnecessary if the auditor plans to test operating effectiveness
3. CControls relevant to significant risks need only be understood by discussion with management, without evaluating implementation
4. DOperating effectiveness testing replaces the need for any substantive procedures for significant risks