When assessing the control risk below the maximum level the auditor will need to identify the controls (polices and procedures) that affects a financial statement assertion. There can be a pervasive effect on many assertions, or a specific effect on an individual assertion. Next, the auditor will evaluate how effectively the controls prevent or detect material misstatements in that assertion. He or she needs to test the controls to determine how the procedure is designed and how it operates. When an auditor determines a control risk at below the maximum level documentation is required. They need tests of control, results of the tests, and the auditor's evaluation of the effectiveness of the controls. They also need the evidential matter that is sufficient to support a specific assessed level of control risk. Evidential matter varies substantially in the assurance it provides to the auditor as he or she develops an assessed level of control risk. The type of evidential matter, its source, its timeliness, and the existence of other evidential matter related to the conclusion to which it leads all bear on the degree of assurance evidential matter provides. These characteristics... [continues]
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