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Area IV: Forming Conclusions and ReportingAUDInterim ReviewInternal Control

CPA · Question 27 · Area IV: Forming Conclusions and Reporting

An auditor is performing a review of a nonissuer's interim financial information. The entity is also subject to an annual audit. During the review, the auditor inquires about the entity's internal control. Which of the following statements is TRUE regarding the auditor's responsibility for internal control in an interim review?

Answer options:

A.

The auditor must perform tests of controls to support the review conclusion.

B.

The auditor has no responsibility to understand internal control for a review engagement.

C.

The auditor should obtain an understanding of internal control and its changes to identify types of potential material misstatements.

D.

The auditor must issue a separate report on internal control if significant deficiencies are found.

How to approach this question

Interim Review (AU-C 930) is a hybrid. It's a review (Inquiry/Analytics) but because it's tied to an audit client, you need to know the controls.

Full Answer

C.The auditor should obtain an understanding of internal control and its changes to identify types of potential material misstatements.✓ Correct
In a review of interim financial information (AU-C 930), the auditor is required to obtain an understanding of the entity's internal control and any significant changes since the most recent audit. This understanding helps the auditor determine the nature, timing, and extent of review procedures (inquiries and analytics).

Common mistakes

Confusing an Interim Review (AU-C 930) with a SSARS Review (AR-C 90). AU-C 930 requires IC understanding; AR-C 90 generally does not require it to the same extent unless needed for procedure design.
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