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Unformatted text preview: 5.63 Internal Control Audit Standards a. In planning an audit, the auditors’ understanding of the internal control components should be used to identify the types of potential misstatements that could occur, to consider the factors affecting the risk of material misstatement, and to influence the design of substantive procedures. b. An audit team obtains an understanding of the design of relevant internal control activities (policies and procedures) and whether they have been implemented. Assessing control risk below the maximum level further involves identifying specific control activities (policies and procedures) relevant to specific assertions that are likely to prevent or detect material misstatements in those assertions. It also involves performing tests of controls to evaluate the operating design and effectiveness of the client’s control activities. c. When seeking a further reduction in the assessed level of control risk, an audit team should consider whether additional audit evidence sufficient to support a further reduction is likely to be...
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