Question

An auditor notices that a bank’s internal controls

Q: Answer-An auditor notices that a bank’s internal controls over loan approvals are weak, but substantive tes...

Weak controls increase audit risk but if substantive procedures show balances are fairly stated, opinion may remain unmodified however, weaknesses are communicated to management.

over loan approvals are weak, but substantive testing of balances shows no material misstatements. Which is the correct implication under SA 315 and SA 330?

A Audit opinion must be qualified immediately.

B Internal control weaknesses are reported, but clean opinion can still be given if substantive evidence supports true and fair view.

C No reporting of weaknesses is necessary since balances are correct.

D Weak controls automatically imply misstatements exist.

E Auditor must withdraw from the engagement.

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An auditor notices that a bank’s internal controls

Solution