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Tests of Control in the Audit Risk Model: Effective? Efficient?
Author(s) -
Blokdijk J. H.
Publication year - 2004
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/j.1099-1123.2004.00089.x
Subject(s) - audit , audit risk , accounting , restructuring , control (management) , business , internal audit , audit substantive test , external auditor , actuarial science , economics , finance , management
Lately, the Audit Risk Model has been subject to criticism. To gauge its validity, this paper confronts the Audit Risk Model as incorporated in International Standard on Auditing No. 400, with the real life situations faced by auditors in auditing financial statements. This confrontation exposes serious deficiencies in the Audit Risk Model, especially regarding tests of control. One conclusion is that internal controls that cannot be reperformed by an auditor, should be disregarded in assessing control risk. Another conclusion is that tests of the other internal controls are far more effective in focusing specific substantive tests, than in assessing control risk with the aim of reducing the size of a random sample. The paper concludes with a proposal for restructuring the audit process.