ACCA Audit and Assurance (F8) Practice Exam

Under which condition would internal controls NOT be tested by auditors?

1. If they are deemed ineffective

2. If they are too complex

3. If the cost is high

4. If they have been bypassed by management

The correct answer is: If they are deemed ineffective

Auditors typically assess the effectiveness of internal controls during an audit to determine their reliability in preventing or detecting misstatements. The situation described in the question indicates a key understanding: if internal controls are deemed ineffective, there is generally no point in testing them further, as ineffective controls cannot provide the assurance required for the financial statements. Instead, auditors would likely focus on substantive testing of transactions and balances, as the reliance on such controls would not support the audit opinion. In this context, if auditors determine that internal controls are ineffective, it signals to them that those controls do not provide the necessary level of assurance over the financial reporting process. Therefore, they would not be subject to testing, as the auditors would need to develop alternative audit strategies to gather evidence. Other conditions, such as complexity or high cost, might lead an auditor to adjust their testing approach, but they would not outright exclude testing of controls. Similarly, even if controls have been bypassed, auditors would still need to gather evidence of the actual transactions that took place, which may involve testing the controls in some form. The focus remains on how those internal controls can provide assurance rather than on the challenges they present. Hence, those scenarios do not eliminate the need to test the controls completely as determining