How does reliance on internal controls affect substantive sample sizes?

Intermediate

Answer

If tests of controls support a lower control-risk assessment, the auditor can accept higher detection risk and reduce the extent (sample size) of substantive procedures. Conversely, weak or untested controls mean higher control risk, lower acceptable detection risk, and larger substantive samples. Control reliance and substantive extent are inversely related.

Real-world example Effective, tested purchase controls let the auditor reduce the substantive sample of purchase transactions.

Common follow-ups: How does control reliance change detection risk? | What happens to samples if controls are weak?

Internal Controls Evaluation Audit Risk & Materiality Audit Sampling

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